B.

M LAW COLLEGE

B.A. LL.B 10TH SEMESTER

SUBJECT- BANKING LAW

TOPIC – RBI, Objectives and organizational structure,
Functions

SUBMITTED BY- SUBMITTED TO-

Vasundhara Gopa Mrs. Ritu Modi
 Acknowledgement

I have taken efforts in this project. However, it would not have been
possible without the kind support and help of many individuals and
organizations. I would like to extend my sincere thanks to all of them.

I am highly indebted to Mrs. Ritu Modi for their guidance and

constant supervision as well as for providing necessary information
regarding the project and also for their support in completing this
project. I would like to express my gratitude towards my parents and
members of BM Law College for their kind cooperation and
encouragement which help me in completion of this project. My thanks
and appreciations also go to my fellow mates in developing the project
and people who have willingly helped me out with their abilities.

Vasundhara Gopa
B.A.LL.B (10th semester )
 Certificate

This is to certify that this project has been made by Vasundhara Gopa of
B.A LL.B [10th Semester].
Under my guidance and have been completed successfully.

Mrs. Ritu Modi

Index
  Introduction –
The Reserve Bank of India (RBI) is India’s central bank, which was
created under the Reserve Bank of India Act on April 1, 1935. The
Reserve Bank of India is the country’s central bank and is responsible
for the supply of money in India and also the oversight of the Indian
banking sector. It also takes care of the payment of the nation and
works for the country’s better economic growth. The Governor sits at
the Central Office, which is also where policies are made. The Reserve
Bank of India has been wholly owned by the Government of India
since 1949 when it was nationalized .. RBI is an institution of national
importance and the pillar of the surging Indian economy. It is a member of the International
Monetary Fund (IMF).

 Objectives Of Central Bank –

 The concept of Reserve Bank of India was based on the strategies formulated by Dr.
Ambedkar in his book named “The Problem of the Rupee – Its origin and its solution”.
 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.
 In 1949, the Reserve Bank of India was nationalized and became a member bank of the
Asian Clearing Union.
 RBI regulates the credit and currency system in India.
 The chief objectives of the RBI are to sustain the confidence of the public in the system,
protect the interests of the depositors, and offer cost-effective banking services like
cooperative banking and commercial banking to the people.
 It controls the monetary policy concerning the national currency, the Indian rupee. The
basic functions of the RBI are the issuance of currency, sustaining monetary stability in
India, operating the currency, and maintaining the country’s credit system.
  Functions of Reserve Bank –

1. Issue of Notes
The most important function of RBI is the issuance of currency notes and coins, except the one
rupee note and coin which are issued by the Ministry of Finance. All other notes bear the
signature of the RBI Governor. However, the agency of distribution of all notes and coins issued
by the Government of India is the Reserve Bank of India.
The Reserve Bank has a monopoly for printing the currency notes in the country. It has the sole
right to issue currency notes of various denominations except one rupee note (which is issued by
the Ministry of Finance).
The Reserve Bank has adopted the Minimum Reserve System for issuing/printing the currency
notes. Since 1957, it maintains gold and foreign exchange reserves of Rs. 200 Cr. Of which at
least Rs. 115 cr. Should be in gold and remaining in the foreign currencies.

2. Banker to the Government–

The second important function of the Reserve Bank is to act as the Banker, Agent and Adviser to
the Government of India and states. RBI is that it takes care of the banking needs of the
government It performs all the banking functions of the State and Central Government which
includes maintaining & operating the deposit accounts of the government, collecting the receipts
of funds, and making payments on behalf of the Government of Indi and it also tenders useful
advice to the government on matters related to economic and monetary policy. It also manages
the public debt of the government and also represents the Indian Government, as a member of
the International Monetary Fund and the World Bank.

3. Banker’s Bank
The Reserve Bank performs the same functions for the other commercial banks as the other
banks ordinarily perform for their customers. RBI lends money to all the commercial banks of
the country and Commercial banks are required to maintain the cash reserves at a rate decided by
the RBI in its monetary policy.
 4. Controller of the Credit
The RBI undertakes the responsibility of controlling credit created by commercial banks. RBI
uses two methods to control the extra flow of money in the economy. These methods are
quantitative and qualitative techniques to control and regulate the credit flow in the country.
These are implemented by announcing monetary policies at regular intervals. The monetary
policy involves the management of interest rates and money supply. The central bank of India
tweaks the money supply to achieve objectives such as liquidity, inflation, and consumption

  When RBI observes that the economy has sufficient money supply and it may cause an
inflationary situation in the country then it squeezes the money supply through its
tight monetary policy and vice versa.

5. Custodian of Foreign Reserves

For the purpose of keeping the foreign exchange rates stable, the Reserve Bank buys and sells
foreign currencies and also protects the country’s foreign exchange funds. RBI sells the foreign
currency in the foreign exchange market when its supply decreases in the economy and vice-
versa. Currently, India has a Foreign Exchange Reserve of around US$ 487 bn.

6. Other Functions

The Reserve Bank performs a number of other developmental works. These works include the
function of clearinghouse arranging credit for agriculture (which has been transferred to
NABARD) collecting and publishing the economic data, buying and selling of Government
securities (gilt edge, treasury bills etc)and trade bills, giving loans to the Government buying and
selling of valuable commodities etc. It also acts as the representative of the Government in the
International Monetary Fund (I.M.F.) and represents the membership of India.

.
RBI’s Developmental role
Promotional functions that support national objectives are organized by RBI that encourage rural
and agricultural economic development. The RBI will regularly issue directives to the
commercial banks to lend loans to small-scale industrial units.

Composition of RBI
Reserve Bank of India is controlled by a central board of directors. The directors are appointed
for a 4-year term by the Government of India in keeping with the Reserve Bank of India Act.
The Central Board consists of:
1. Governor
2. 4 Deputy Governors
3. 2 Finance Ministry representatives
4. 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai, and
New Delhi
5. The executive head of RBI is Governor.
6. The Governor is accompanied by 4 deputy governors.

 The First Governor of RBI was Sir Osborne Smith and the First Indian Governor of RBI
was C D Deshmukh.
 The First woman Deputy Governor of RBI was K J Udeshi.
 The only Prime Minister who had been the Governor of RBI was Manmohan Singh.

Zonal Offices
 RBI has four zonal offices: New Delhi for North, Chennai for South, Kolkata for East,
and Mumbai for West.
 The Reserve Bank of India has 19 regional offices and 11 sub-offices at present.
 The bank has two training colleges for its officers:

1. Reserve Bank Staff College at Chennai

2. College of Agricultural Banking at Pune
Conclusion
References

Bibliography