Establishment of RBI

The Reserve Bank of India is the country's central bank. This organization is in charge of issuing and supplying the rupee. Economically and financially, the RBI is the ultimate authority. India's RBI is primarily responsible for regulating and legalizing all currencies. It was established on April 1, 1935. Nonetheless, it was nationalized after India's independence in 1947. Along with its role as the central bank for currency circulation, RBI also has several other responsibilities. 

The committee makes rules and regulations for all bank operations in India and works for our nation's economic development. Let's know about the story of the reserve bank of India. 

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More On the History of RBI

British authorities established the Imperial Bank of India in 1921 as India's national bank. However, the Imperial Bank struggled to articulate its achievement sufficiently and failed to make any progress as the Central Bank. Consequently, the government entrusted the Hilton Young Commission with the matter in 1925. A single association cannot operate as two separate entities for both credit and cash management. The commission presented their reports saying this cannot be done. The establishment of a national bank is therefore necessary. The Reserve Bank of India was established on April 1, 1935. The nationalization of the RBI occurred in January 1949.

The RBI was also unique in the fact that, right from its very beginning, it viewed itself as taking on an exclusive role in promoting progress, particularly in agriculture. When India launched its plan attempts, the Bank's advancement function gained prominence, particularly in the sixties when the Reserve Bank, from various perspectives, initiated the idea and practice of using finance to catalyze improvements.

Functions of RBI

Now, we will discuss the functions of RBI. Money supply management is one of the core functions of the RBI. Additionally, it has been coordinated for agriculture, industry, and a number of other fields. The RBI is likewise responsible for supporting the value of the rupee outside the country. 

RBI Act 1934 states that the RBI performs three kinds of functions as any other central bank. Let's take a closer look at these three types of functions in detail.

1. Banking Functions 

• Bank of Issue: Among the Reserve Bank's departments, one is responsible for issuing currency notes. As per section 22 of the RBI Act, it is the only bank with authority to print numerous currency notes, except one rupee note, which the Ministry of Finance issues. 

• Government-Banker Relations: Secondly, the Reserve Bank of India functions as a banker, agent, and adviser to the Government of India. It is responsible for the Bank's banking activities on behalf of the Governments of India. Furthermore, it provides the government with useful recommendations on economic and financial topics and governing the government's public debt.

• Bankers' Bank: Essentially, the Reserve Bank of India functions as the banker's bank, lending money to all of the country's commercial banks. 

• The Credit Controller: As the RBI has the power to affect the volume of credit made by banks in India, it can be considered a credit controller. It can change the Bank rate or engage in open market activity to accomplish these objectives. 

• Foreign Reserve Custodian: Reserve banks must ensure the outer estimation of public cash is balanced. Gold and foreign currencies are kept as reserves to cover note issues and to meet the unfavourable offset between regions. Furthermore, foreign currencies are supervised by the government through controls.

2. Supervisory Functions

Reserve Bank Act, 1934, and Banking Regulation Act, 1949 gave the RBI vast powers of supervision and control over the business and cooperative banks. The RBI has jurisdiction over licensing, foundations, liquidity, recreation, and liquidation of assets. The RBI has greatly assisted in improving the standard of banking in India through its supervisory functions.

3. Promotional Functions

The Reserve Bank's role has steadily broadened during the past decade as monetary development has become a new priority. It now performs a variety of development and promotional functions that, in the past, were considered outside the traditional scope of central banking. 

The list of RBI banks in India includes some of the most famous banks like Bank of Baroda, Bank of Maharashtra, Indian Overseas Bank, Union Bank of India, Central Bank of India, and many more. To know whether your Bank comes under the RBI or not, check the list of RBI banks in India on the website of RBI. 

The Reserve Bank of India heavily influences financial markets. So, now that you have read this blog, you must have gained a thorough understanding of the origin and history of RBI, its functions, objectives, interesting history, and several other interesting facts about the Reserve Bank of India.