TABLE OF CONTENT

PARTICULARS PAGE NO

INTRODUCTION 1

HISTORY 3

ROLE IN SOCIAL AND ECONOMIC DEVELOPMENT 1

CONCLUSION 1

BIBLIOGRAPHY 3
 Introduction:
The Reserve Bank of India, chiefly known as RBI, is India's central bank and
regulatory body responsible for regulation of the Indian banking system. It is
under the ownership of Ministry of Finance, Government of India. It is
responsible for the control, issue and maintaining supply of the Indian rupee.
It also manages the country's main payment systems and works to promote its
economic development .The Reserve Bank of India, chiefly known as RBI,
is India's central bank and regulatory body responsible for regulation of the
Indian banking system.
It is under the ownership of Ministry of Finance, Government of India. It is
responsible for the control, issue and maintaining supply of the Indian rupee. It
also manages the country's main payment systems and works to promote its
economic development.

The overall direction of the RBI lies with the 21-member central board of
directors, each of these local boards consists of five members who represent
regional interests and the interests of co-operative and indigenous banks.

It is a member bank of the Asian Clearing Union. The bank is also active in
promoting financial inclusion policy and is a leading member of the Alliance
for Financial Inclusion (AFI). The bank is often referred to by the name 'Mint
Street'.[11]
 History of RBI:
The Reserve Bank of India was established following the Reserve Bank of India
Act of 1934.Though privately owned initially, it was nationalised in 1949 and
since then fully owned by the Ministry of Finance, Government of India .
This central banking institution was established based on the suggestions of the
“Royal Commission on Indian Currency & Finance” in 1926. This commission
was also known as Hilton Young Commission.

The Reserve Bank of India was established on April 1, 1935 in accordance with
the provisions of the Reserve Bank of India Act, 1934.

The Central Office of the Reserve Bank was initially established in Kolkata but
was permanently moved to Mumbai in 1937. The Central Office is where the
Governor sits and where policies are formulated.

Though originally privately owned, since nationalisation in 1949, the Reserve

Bank is fully owned by the Government of India.

On 12 November 2021, the Prime Minister of India, Narendra Modi, launched

two new schemes which aim at expanding investments and ensuring more
security for investors. The two new schemes include the RBI Retail Direct
Scheme and the Reserve Bank Integrated Ombudsman Scheme. The RBI Retail
Direct Scheme is targeted at retail investors to invest easily in government
securities. According to RBI, the scheme will allow retail investors to open and
maintain their government securities account free of cost.
bibliograph

As per RBI Act there is no social responsibility specified for RBI

But it had promoted several institutions for development of socio economic

conditions .Some of them are-

1.For agricultural development it created a department -Agricultural Credit Department

and later Agricultural Re Finance Development Corporation which became later
NABARD.

2.For promoting savings it formed first mutual fund Unit Trust of India

3.To protect small depositors of banks Deposit Insurance Corporation as subsidiary .After
USA India was second country to provide deposit insurance.

4.The Small Industries Development Bank and IDBI were established to promote
industrial development

5.Set up National Housing Bank to promote housing loans.

6.Promoted State Finance Corporations and provided refinance facilities

7.Bank established College of Agricultural Banking and Bankers Training College for
training bank staff including those from other banks

8.Established MICR mechanised clearing houses at various places to speed up clearing

9.Established IBRDT at Hyderabad to improve and research in Banking Technology

10.Established RTGS and other fast fund transfer systems

11.Bank established efficient Banking Supervision -There is no bank failure in India since
1965,when banks failed even in USA

12.Bank forced branch expansion policy for spreading branches all over India

13.Bank introduced priority sector lending to small borrowers.

14.Bank was instrumental in spreading banking literacy

15.Bank introduced Lead Bank Scheme for Development of Districts

16.Introduced regulation of co -operative banks

17.Bank established its own note printing press.

 18.Bank assisted in formulating CBS and installation of ATMs.

19.Introduced Indian Debit card RuPAY.

There are so many more .Only few examples

Role of Reserve Bank of India (RBI)

It is in charge of deciding on the country’s monetary policy. The Reserve Bank of India’s (RBI) primary
responsibility is to preserve financial stability and appropriate liquidity in the economy.

Some of the significant functions of the Reserve Bank of India are mentioned and explained below:

Monetary Management – The formulation and seamless execution of monetary policy are one of the
Reserve Bank of India’s main responsibilities. Various policy instruments are used by monetary policy to
impact the cost and availability of money in the economy. The goal remains to encourage economic
growth while maintaining price stability. It assures a steady supply of credit to the economy’s productive
sectors.

The issuer of Currency – Currency management and issuance are critical central banking functions. The
Reserve Bank of India (RBI) is in charge of the country’s currency design, manufacture, distribution, and
overall management. It aims to ensure that the state has a sufficient supply of clean and legitimate
notes. Its goal is to lower the risk of counterfeiting. Counterfeit notes are frequently used for terrorist
financing, which has a variety of negative consequences.

Banker and debt manager of the Government – The Reserve Bank of India (RBI) is in charge of the
government’s banking transactions. The Reserve Bank of India also holds the cash holdings of the Indian
government. It can also serve as a lender to state governments. It appoints other banks to act as its
agents in carrying out the government’s transactions. On behalf of the federal and state governments, it
also manages public debt and offers new loans.

Banker to Banks – The RBI is also responsible for the settlement of interbank transactions. This is
normally accomplished through the employment of a “clearing house,” which allows banks to present
cheques and other similar instruments for clearing. The central bank serves as a common banker for all
of the banks.
Financial Regulation and Supervision- The regulatory and supervisory powers of the RBI are extensive.
Through a variety of policy initiatives, it aims to ensure general financial stability. Its goal is to ensure the
orderly development and conduct of banking activities, as well as bank liquidity and solveny.

Developmental Role – The Reserve Bank of India (RBI) actively supports and enhances development
efforts in the country. It guarantees that the productive sectors of the economy have access to sufficient
credit and establishes organisations to support the development of financial infrastructure. It also tries
to ensure that everyone has access to banking services.

Oversees Market Operations – The Central Bank implements its monetary policy through government
securities, foreign exchange, and money market operations. It also regulates and develops market
instruments such as the term money market, repo market, and others.

Foreign Exchange Management – The foreign exchange market is regulated by the Reserve Bank of India
(RBI). It has also opened practically all areas to international investment.Some of the major causes of
inflation in India are an increase in money supply, deficit financing, increase in government expenditure,
inadequate agricultural and industrial growth, rise in administered prices, rising import prices and rising
taxes.

Formulates Banking policy --The Reserve is empowered to formulate banking policy in the interest of
the public or depositors banking policy in relation to advances and provide direction on the purpose of
the advances, margins to be maintained in a secured advances, the maximum amount of advance may
be made, the rate of interest, terms and conditions for advances or guarantees may be given.

Licensing Authority-- The Reserve Bank of India is empowered to grant license to commence banking
business in India, including the power to cancel a license granted to a banking company. A petition was
filed under Article 226 of the Constitution, challenging the constitutional validity of section 22 of the
Banking Companies Act, 1949. Section 22 empowers, Reserve Bank of India to grant license to Banks and
banks which were already in existence on the commencement of the Act have to apply for license before
the expir y of six months from commence. The petitioner contended that the section 22 of the Banking
Regulating Act, 1949 is in restraint of trade and business hence unconstitutional. The writ was dismissed
and the High Court declared section 22 of the Banking Regulating Act, 1949 as constitutionally valid and
cherished the role of Reserve Bank of India in the economic development of the country. The Madras
High Court meticulously said, “The Reserve Bank of India was established with a view to fostering the
banking business and not for impeding the growth of such business. The powers vested in it under
Section 22 are not one invested with a mere officer of the Bank. The International Journal of Business
Administration and Management. 49 standards for the exercise of the power have been laid down in
Section 22 itself. The Reserve Bank is a non-political body concerned with the finances of the country.
When a power is given to such a body under a statute which prescribes the regulations of a Banking
Company, it can be assumed that such power would be exercised so that genuine: banking concerns
could be allowed to function as a bank, while institutions masquerading as banks or those run on
unsound lines or which would affect the interests of the public could be weeded out.”

Depositor Awareness and Education -- The Reserve Bank of India has constituted a fund called
“Depositor Education and Awareness Fund.” The fund is utilized for the promotion of depositors‟
interest and other purposes in the interest of the depositor. Regulation and Management of Foreign
Exchange .The Reserve Bank of India is empowered to regulate, prohibit, and restrict dealing in foreign
exchange. It issues license to banks and other institution to act as the authorized agency in the foreign
exchange market .The functions of the Reserve Bank today can be categorised as follows:

 Monetary and Credit policy

 Foreign exchange management

 Currency management International Journal of Business Administration and Management

 Banker to banks & Lender of the last resort

 Banker to the Central and State Governments

 Central clearing house of payment and settlement systems

 Performing developmental and promotional functions.

 Monetary Policy of the RBI: RBI works as the monetary authority of India and there by operates the
monetary policy. Reserve Bank of India announces Monetary Policy every year in the Month of April. This
is followed by three quarterly Reviews in July, October and January. But, RBI at its discretion can
announce the measures at any point of time. The Annual Monetary Policy is made up of two parts viz.
Part A: macroeconomic and monetary developments; Part B: Actions taken and fresh policy measures.
Monetary policy of the RBI deals with almost all other vital topics such as financial stability, financial
markets, interest rates, credit delivery, regulatory norms, financial inclusion and institutional
developments etc. Objectives of the monetary policy: Monetary policy refers to an umbrella of
operations used for the control of money supply in the economy with broad objective to maintain
 economic and financial stability; and ensure adequate financial resources for the purpose of
development. These objectives of the monetary policy in India have gone through a process of gradual
evolution and can be further expanded to maintaining price stability, adequate flow of credit to
productive sectors, promotion of productive investments & trade, promotion of exports and economic
growth. The following are the principal objectives of monetary policy:

I. Full Employment: Full employment has been ranked among the foremost objectives of monetary policy.
It is an important goal not only because unemployment leads to wastage of potential output, but also
because of the loss of social standing and self-respect.

Ii .Price Stability: One of the policy objectives of monetary policy is to stabilise the price level. Both
economists and laymen favour this policy because fluctuations in prices bring uncertainty and instability
to the economy.

iii. Economic Growth: One of the most important objectives of monetary policy in recent years has been
the rapid economic growth of an economy. Economic growth is defined as “the process whereby the real
per capita income of a country increases over a long period of time.”

iv. Balance of Payments: Another objective of monetary policy since the 1950s has been to maintain
equilibrium in the balance of payments. Instruments of Monetary Policy: The instrument of monetary
policy are tools or devise which are used by the monetary authority in order to attain some
predetermined objectives.
ROLE OF RBI IN ECONOMIC AND SOCIAL
DEVELOPMENT OF INDIA.

 GROUP NO-

STUDENTS NAME REGISTRATION NUMBER

5
CONCLUSION

The Reserve Bank of India was established with a view to fostering the banking business and
not for impeding the growth of such business. The powers vested in it under Section 22 are
not one invested with a mere officer of the Bank. The standards for the exercise of the
power have been laid down in Section 22 itself. The Reserve Bank is a non-political body
concerned with the finances of the country. When a power is given to such a body under a
statute which prescribes the regulations of a Banking Company, it can be assumed that such
power would be exercised so that genuine: banking concerns could be allowed to function
as a bank, while institutions masquerading as banks or those run on unsound li es or which
would affect the interests of the public could be weeded out. The Reserve Banks
developmental role includes ensuring credit to productive sectors of the economy, creating
institutions to build financial infrastructure, and expanding access to affordable financial
services. It also plays an active International Journal of Business Administration and
Management. ISSN 2278-3660 Volume 7, Number 1 (2017), © Research India Publications
http://www.ripublication.com 57 role in encouraging efficient customer service throughout
the banking industry, as well as extension of banking service to all, through the thrust on
financial inclusion. RBI works as the monetary authority of India and there by operates the
monetary policy. Reserve Bank of India announces Monetary Policy every year in the Month
of April. This is followed by three quarterly Reviews in July, October and January. But, RBI at
its discretion can announce th e measures at any point of time. The Annual Monetary Policy
is made up of two parts viz. Part A: macroeconomic and monetary developments; Part B:
Actions taken and fresh policy measures. Monetary policy of the RBI deals with almost all
other vital topics such as financial stability, financial markets, interest rates, credit delivery,
regulatory norms, financial inclusion and institutional developments etc. These are various
selective instruments of the monetary policy. However the success of these tools is limited
by the availability of alternative sources of credit in economy, working of the Non-Banking
Financial Institutions (NBFIs), profit motive of commercial banks and undemocratic nature
off these tools. But a right mix of both the general and selective tools of monetary policy can
give the desired results.
There is considerably uncertainty about the extent to which monetary policy affects
economic activity and inflation. Indeed, previous empirical work has even provided
estimates that are at odds with the Bank's view and standard macroeconomic theory about
the direction of these effects. In response to an increase in the cash rate, inflation has been
found to rise. This if often explained by an anticipatory component of monetary policy.
Inflation does not rise in  to an increase in the cash rate, but the Bank raises the cash rate in
anticipation of higher inflation.

In this paper, I show that the failure of standard estimates to account for this anticipatory
component of policy is driven by an omitted systematic response of the cash rate to money
and credit market conditions. When these conditions ease, the Bank raises the cash rate. As
easier credit conditions raise economic activity and inflation, the increase in inflation is then
falsely attributed to the increase in the cash rate. Controlling for the Bank's forecasts does
not remove this bias as these forecasts do not fully capture the inflationary effects of
changing credit conditions. Since easier credit market conditions systematically predict
inflation to print higher than forecast by the Bank, the price puzzle emerges even after
purging cash rate changes of the Bank's own inflation forecasts.

I show that it is therefore crucial to account for the response of monetary policy to credit
market conditions when estimating its inflation effects. Furthermore, it is important to
account for cash rate changes expected by financial market participants. Purging cash rate
changes of the Bank's response to its forecasts and to several money and credit market
spreads and of financial markets' expectations of future cash rate changes provides
monetary policy shocks that are unanticipated and exogenous to the inflation outlook. Using
these shocks, I find the expected effects of monetary policy. An increase in the cash
rate lowers inflation and raises the unemployment rate.
BIBLIOGRAPHY

1. Arun,T.G,Turner,J. D (2002) “Financial Sector Reforms in Developing Countries: The Indian

Experience”; World Economy; (March 2002, Vol. 25 Issue 3), (Pg 429-435)

2. Banerjee Abhijit & Duflo Esther (2004) “what do banks (not) do?”; Massachusetts Institute
of technology; (September 11, 2004) (www.fedral.co.in) International Journal of Business
Administration and Management. ISSN 2278-3660 Volume 7, Number 1 (2017), © Research
India Publications http://www.ripublication.com 58

3. Bhatt O.P. (2007) “Banking In India”; Yojana; (August, 2007) (Pg. No. 83-87)

4. Barman R. B. and Samanta G. P “Banking Services Price Index: An Exploratory Analysis for
India” (www.financialindia.com)

5. Das, Abhima, Ghosh, Saibal (2006) “Financial Deregulation and Efficiency: An Empirical
Analysis of Indian Banks during the Post Reform Period” Review of Financial Economics;
( Sep2006, Vol. 15 Issue 3), (Pg193-221)

6. Hyde Dr.Anukool Manish (2007) “A study of Learned Optimism in Nationalized Banks and
Private Banks” BVIMR Management Edge (Vol 3 No. 2, Jan-June 2007) (Pg:26-32)

7. Ramasastri A.S. and Achamma Samuel (2006) “Banking sector development in India,
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(Vol 27, No.1 and 2 Summer and Monsoon 2006 ) (Pg No. -177-205)

8. Sayuri Shirai (2001) “Assessment of India‟s Banking Sector Reforms from the Perspective
of the governance of the banking System” Paper presented at ESCAP-ADB Joint workshop on
“Mobilizing Domestic Finance for Development: Reassessment of bank finance and Debt
Markets in Asia and Pacific” Bangkok 22 -23 November 2001