Reserve Bank of India(RBI), was established in April 1935 with a capital of 5 crores on the recommendations of the Hilton Young Commission. Later in 1949 it was nationalized under the general superintendence and direction entrusted to a 20 members central board of Directors. Structure of RBI
- Governor
- 4 Deputy Governors
- 1 Government official from the Ministry of Finance,
- 10 Nominated Directors by the Government, who will give important elements in the economic life of country and,
- 4 nominated directors by the Central Government who will represent 4 local Boards.
Functions of Reserve Bank of India / RBI
- The RBI has the sole right to issue bank notes of all denominations. The RBI also acts as agent to government in issuing coins and small value notes.
- It Acts as an banker to the government. It is an agent to the Central government and all state governments in India except that of Jammu and Kashmir. It is obliged to do government transactions and carry out their remittances and other banking operations.
- It also acts as an banker to Banks, where every Scheduled bank has to maintain a certain cash and other equivalent balances of its demand and time liabilities. Where in 1962, the amendment made that the banks has to maintain cash reserves and statutory reserves with RBI.
- RBI also acts as an controller of credit i.e., it has the power to influence the volume of credit created by banks in India for various reasons ex like to control the Inflation.
Other Powers of RBI:
- Every Bank has to get a licence from the RBI to do banking business within India. ( New bank licences)
- To open a new branch, every bank has to get permission from the RBI.
- Weekly return has to be sent to rbi by all scheduled bank in detail, showing the assets and liabilities.
- It has the right to inspect the records of commercial banks.
- It holds all the cash reserves of scheduled banks.
- RBI controls the credit operations of banks through qualitative and quantitative controls.
- The whole Indian banking system is controlled by holding the rights for licencing, calling for information and inspection.
- Re-discount facilities is provided to the banks acting as the last resort lender and encouraging it developing new initiatives by different banks.
