Basic Facts

• India’s Central Bank
• Established: 1 April 1935
• Based on: Hilton Young Commission (1926)
• Act: Reserve Bank of India Act, 1934
• Initial HQ: Calcutta → shifted to Mumbai (1937)
• Nationalised: 1 January 1949
  • Under the RBI (Transfer to Public Ownership) Act, 1948

Historical Points

• First British colony to establish its own central bank
• RBI acted as:
  • Central Bank of Burma (Myanmar) till April 1947
  • Central Bank of Pakistan till June 1948
• First Governor: Sir Osborne Arkell Smith
• First Indian Governor: Sir C.D. Deshmukh

Objectives of RBI

• Maintain monetary stability
• Ensure financial stability
• Manage currency and credit
• Support economic growth
• Promote financial inclusion
• Regulate financial institutions

Acts Administered by RBI

• RBI Act, 1934
• Banking Regulation Act, 1949
• FEMA, 1999
• Government Securities Act, 2006
• Payment and Settlement Systems Act, 2007
• SARFAESI Act, 2002 (Chapter II)
• Credit Information Companies Act, 2005
• Factoring Regulation Act, 2011

Organisational Structure

Central Board of Directors

• Total Members: 21
• Term: 4 years
• Composition:
  • Governor
  • Up to 4 Deputy Governors
  • 10 non-official members (various fields)
  • 4 representatives from Local Boards
  • 2 Government officials

Local Boards

• Regions: West, East, North, South
• Members: 5 per board
• Appointed by: Central Government
• Term: 4 years

RBI Offices

• Central Office: Mumbai
• Zonal Offices (4):
  • Mumbai (West)
  • Delhi (North)
  • Chennai (South)
  • Kolkata (East)
• Regional Offices: ~22 (mostly state capitals)

Governor of RBI

• Appointed by: Government of India
• Powers derived from: RBI Act, 1934
• Current Governor (as given): Sanjay Malhotra
• Role: Monetary policy, financial stability, representation at global forums

Core Functions of RBI

1. Monetary Authority

• Formulates and implements monetary policy
• Tools:
  • Repo rate
  • Reverse repo
  • Open Market Operations (OMOs)

2. Regulator & Supervisor

• Regulates banks, NBFCs, and financial institutions
• Protects depositors’ interests

3. Issuer of Currency

• Issues, exchanges, and destroys currency notes
• Digital Rupee (e₹): CBDC (Retail & Wholesale)

4. Manager of Foreign Exchange

• Implements FEMA, 1999
• Manages the forex market & reserves

5. Banker to Government

• Manages public debt
• Issues government securities

6. Banker to Banks

• Maintains accounts of scheduled banks
• Lender of Last Resort

7. Regulator of Payment Systems

• Oversees UPI, RTGS, NEFT, etc.

8. Developmental Role

• Financial inclusion
• Rural credit
• Banking outreach

RBI Publications

• Annual Report
• Financial Stability Report (FSR)
• Monetary Policy Report (MPR)
• Handbook of Statistics on the Indian Economy

RBI Surplus Transfer

• Surplus = Income – Expenditure
• Part retained as equity capital
• Remaining transferred to the Central Government

Debate:

• Government: wants a higher surplus transfer
• RBI: fears inflation, reduced financial buffer

RBI Autonomy

• Operational independence in monetary policy
• Section 7(1), RBI Act 1934:
  • Govt can issue directions in the public interest (after consultation)

RBI Significance

• Inflation control (flexible inflation targeting)
• Forex reserve management
• Currency management (e.g., 2016 demonetisation)
• Financial inclusion (PMJDY)

Criticism of RBI

• Government interference
• Conservative monetary stance
• NBFC regulation challenges
• Growth vs inflation trade-off