Reserve Bank of India

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Reserve Bank of India

Logo of RBI The RBI headquarters in Mumbai

Headquarters Mumbai, Maharashtra, India

Coordinates
18°55′58″N 72°50′13″ECoordinates: 18°55′58″N 72°5
0′13″E

Established 1 April 1935

Governor Duvvuri Subbarao

Central bank of India

Currency
Indian Rupee Symbol:
ISO 4217 Code INR

Reserves $287.37 billion(2009)

Base borrowing 5.2%

rate

Base deposit rate 9.5%

Website rbi.org.in

RBI is the apex banking body in India

The Reserve Bank of India (RBI, Hindi: भारतीय िरजवर बैक) is the central banking system of India and controls the
monetary policy of the rupeeas well as US$287.37 billion (2009) of currency reserves. The institution was
established on 1 April 1935 during the British-Raj in accordance with the provisions of the Reserve Bank of
India Act, 1934 [1] and plays an important part in the development strategy of the government. It is a member
bank of the Asian Clearing Union.

Contents
[hide]

• 1 History

○ 1.1 1935 - 1950

○ 1.2 1950 - 1960

○ 1.3 1960 - 1969

○ 1.4 1969–1985

○ 1.5 1985–1991

○ 1.6 1991–2000

○ 1.7 since 2000

• 2 Structure

○ 2.1 Central Board of

Directors

○ 2.2 Governors

○ 2.3 Supportive bodies

○ 2.4 Offices and

branches

• 3 Main Functions

○ 3.1 Monetary

Authority

○ 3.2 Manager of

exchange control

○ 3.3 Issuer of currency

○ 3.4 Developmental

role
 ○ 3.5 Related functions

• 4 Further reading

• 5 External links

• 6 References

[ edit]History
[edit]1935 - 1950
The central bank was founded in 1935 to respond to economic troubles after the first world war.[2] The Reserve
Bank of India was set up on the recommendations of the Hilton Young Commission. The commission
submitted its report in the year 1926, though the bank was not set up for another nine years. The Preamble of
the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issue of bank
notes, to keep reserves with a view to securing monetary stability in India and generally to operate the currency
and credit system in the best interests of the country. The Central Office of the Reserve Bank was initially
established in Kolkata, Bengal, but was permanently moved to Mumbai in 1937. The Reserve Bank continued
to act as the central bank for Myanmartill Japanese occupation of Burma and later up to April 1947, though
Burma seceded from the Indian Union in 1937. After partition, the Reserve Bank served as the central bank
for Pakistan until June 1948 when the State Bank of Pakistan commenced operations. Though originally set up
as a shareholders’ bank, the RBI has been fully owned by the government of India since its nationalization in
1949.[3]

[edit]1950 - 1960
Between 1950 and 1960, the Indian government developed a centrally planned economic policy and focused
on the agricultural sector. The administration nationalized commercial banks[4] and established, based on
the Banking Companies Act, 1949 (later called Banking Regulation Act) a central bank regulation as part of the
RBI. Furthermore, the central bank was ordered to support the economic plan with loans.[5]

[edit]1960 - 1969
As a result of bank crashes, the reserve bank was requested to establish and monitor a deposit insurance
system. It should restore the trust in the national bank system and was initialized on 7 December 1961. The
Indian government founded funds to promote the economy and used the slogan Developing Banking. The
Gandhi administration and their successors restructured the national bank market and nationalized a lot of
institutes.[6] As a result, the RBI had to play the central part of control and support of this public banking sector.
[7]---rp

[edit]1969–1985
Between 1969 and 1980 the Indian government nationalized 20 banks. The regulation of the economy and
especially the financial sector was reinforced by the Gandhi administration and their successors in the 1970s
and 1980s.[6] The central bank became the central player and increased its policies for a lot of tasks like
interests, reserve ratio and visible deposits.[7] The measures aimed at better economic development and had a
huge effect on the company policy of the institutes. The banks lent money in selected sectors, like agri-
business and small trade companies.[8]

The branch was forced to establish two new offices in the country for every newly established office in a town.
[9]
The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the
effects.[10]

[edit]1985–1991

A lot of committees analysed the Indian economy between 1985 and 1991. Their results had an effect on the
RBI. The Board for Industrial and Financial Reconstruction, the Indira Gandhi Institute of Development
Research and the Security & Exchange Board of India investigated the national economy as a whole, and the
security and exchange board proposed better methods for more effective markets and the protection of investor
interests. The Indian financial market was a leading example for so-called "financial repression" (Mackinnon
uand Shaw).[11] The Discount and Finance House of India began its operations on the monetary market in April
1988; the National Housing Bank, founded in July 1988, was forced to invest in the propoerty market and a
new financial law improved the versatility of direct deposit by more secirity measures and liberalisation.[12]

[edit]1991–2000

The national economy came down in July 1991 and the Indian rupee was devalued.[13] The currency lost 18%
relative to the US dollar, and the Narsimahmam Committee advised restructuring the financial sector by a
temporal reduced reserve ratio as well as the statutory liquidity ratio. New guidelines were published in 1993 to
establish a private banking sector. This turning point should reinforce the market and was often called neo-
liberal[14] The central bank deregulated bank interests and some sectors of the financial market like the trust
and property markets.[15] This first phase was a success and the central government forced a diversity
liberalisation to diversify owner structures in 1998.[16]

The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks
in July to interact with the capital market to reinforce their capital base. The central bank founded a subsidiary
company—the Bharatiya Reserve Bank Note Mudran Limited—in February 1995 to produce banknotes.[17]

[edit]since 2000
The Foreign Exchange Management Act from 1999 came into force in June 2000. It should improve the foreign
exchange market, international investments in India and transactions. The RBI promoted the development of
the financial market in the last years, allowed online banking in 2001 and established a new payment system in
2004 - 2005 (National Electronic Fund Transfer).[18] The Security Printing & Minting Corporation of India Ltd., a
merger of nine institutions, was founded in 2006 and produces banknotes and coins.[19]

The national economy's growth rate came down to 5,8% in the last quarter of 2008 - 2009[20] and the central
bank promotes the economic development.[21]

[ edit]Structure
[edit]Central Board of Directors
The Central Board of Directors is the main committee of the central bank and has not more than 20 members.
The government of the republic appoints the directors for a four year term.

Central Board of Directors

Name Position

Duvvuri Subbarao Governor

Shyamala Gopinath Deputy Governor

Usha Thorat Deputy Governor

K. C. Chakrabarty Deputy Governor

Subir Gokarn Deputy Governor

Y. H. Malegam Regional of the West

Suresh D. Tendulkar Regional of the East

U. R. Rao Regional of the North

Lakshmi Chand Regional of the South

 H. P. Ranina Lawyer Supreme Court of India

Ashok S. Ganguly Chairman Firstsource Solutions Limited

Azim Premji Chairman WIPRO Limited

Kumar Mangalam Birla Chairman Aditya Birla Group of Companies

Shashi Rajagopalan Advisor

Suresh Neotia former Chairman Ambuja Cement Co.

A. Vaidyanathan Economist, Professor Madras Inst.

Man Mohan Sharma Chemist, Professor Mumbai University

D. Jayavarthanavelu Chairman Lakshmi Machine Works Limited

Sanjay Labroo CEO Asahi India Glass Ltd.

Sunanda padmanabhan Government representative

Ashok Chawla Government representative

[edit]Governors

The central bank had 22 governors since 04.01.1935. The regular term of office is a four years period,
appointed by the national administration.

[edit]Supportive bodies
The Reserve Bank of India has four regional represantations: North in New Delhi, South in Chennai, East in
Kolkata and West in Mumbai. The representations are formed by five members, appointed for four years by the
central government and serve - beside the advice of the Central Board of Directors - as forum for regional
banks and to deal with delegated tasks from the central board.[22] The institution has 22 regional offices.

The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD committee to control
the financial institutions. It has four members, appointed for two years, and takes measures to strength the role
of statutory auditors in the financial sector, external monitoring and internal controlling systems.

The Tarapore committee was setup by the Reserve Bank of India under the chairmanship of former RBI deputy
governor S S Tarapore to "lay the road map" to capital account convertibility. The five-member committee
recommended a three-year timeframe for complete convertibility by 1999-2000.

On 1 July 2006, in an attempt to enhance the quality of customer service and strengthen the grievance
redressal mechanism, the Reserve Bank of India constituted a new department — Customer Service
Department (CSD).

[edit]Offices and branches

The Reserve Bank of India has branch offices at most state capitals and at a few major cities in India[total of 18
places] -
viz. Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai,Delhi, Guwahati, Hyderabad, Jaipur,
Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, Patna, and Thiruvananthapuram. Besides it has sub-
offices at Dehradun, Gangtok, Kochi, Panaji, Raipur,Ranchi, Shimla and Srinagar.

The Bank has also two training colleges for its officers, viz. Reserve Bank Staff College at Chennai and College
of Agricultural Banking at Pune. There are also four Zonal Training
Centres at Belapur,Chennai, Kolkata and New Delhi.

[ edit]Main Functions

Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity through agriculture".
[23]
The RBI Regional Office in Delhi.

The RBI Regional Office in Kolkata.

[edit]Monetary Authority
The Reserve Bank of India is the main monetary authority of the country and beside that the central bank acts
as the bank of the national and state governments. It formulates, implements and monitors the monetary policy
as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price
stability and ensuring adequate flow of credit to productive sectors. The national economy depends on the
public sector and the central bank promotes an expensive monetary policy to push the private sector since the
financial market reforms of the 1990s.[24]

The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of
banking operations within which the country's banking and financial system functions. Objectives are to
maintain public confidence in the system, protect depositors' interest and provide cost-effective banking
services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India
(RBI) for effective redressal of complaints by bank customers. The RBI controls the monetary supply, monitors
economic indicators like the gross domestic product and has Sexto decide the design of the rupee banknotes
as well as coins.[25] Aoustin
[edit]Manager of exchange control
The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. Objective: to
facilitate external trade and payment and promote orderly development and maintenance of foreign exchange
market in India.

[edit]Issuer of currency
The bank issues and exchanges or destroys currency and coins not fit for circulation.The Objectives are giving
the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or
improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit
system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the
economic structure of the country so that it can achieve the objective of price stability as well as economic
development, because both objectives are diverse in themselves.

[edit]Developmental role
The central bank has to perform a wide range of promotional functions to support national objectives and
industries.[5] The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are
results of the dominant part of the public sector.[26]

[edit]Related functions
The RBI is also a banker to the Government and performs merchant banking function for the central and the
state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to
promote private real estate acquisition.[27] The institution maintains banking accounts of all scheduled banks,
too.

There is now an international consensus about the need to focus the tasks of a central bank upon central
banking. RBI is far out of touch with such a principle, owing to the sprawling mandate described above. The
recent financial turmoil world-over, has however, vindicated the Reserve Bank's role in maintaining financial
stability in India.

[ edit]Further reading
 Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by K.
N. Raj. In: The Economic Journal. Vol. 59, No. 235 (Sep., 1949), pp. 436–438.

 Findlay G. Shirras: The Reserve Bank of India. In The Economic Journal. Vol.
44, No. 174 (Jun., 1934), pp. 258–274.

 Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
RESERVE BANK OF INDIÀ`S BALANCE SHEET: ANALYTICS AND
DYNAMICS OF EVOLUTION, November 2004.
[ edit]External links
Wikimedia Commons has
media related to: Reserve
Bank of India

 Reserve Bank of India Official site

 Reserve Bank of India Ombudsman site

[ edit]References
1. ^ "58G" (PDF). Retrieved 2010-08-20.

2. ^ Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by
K. N. Raj. In: The Economic Journal. Vol. 59, No. 235 (Sep., 1949), PP. 436-

438, P. 436.

3. ^ "History". RBI. 1935-04-01. Retrieved 2010-08-20.

4. ^ Beth Anne Wilson und Geoffrey N. Keim: India and the Global Economy in
Business Economics, January 2006, S.29.

5. ^ a b Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
RESERVE BANK OF INDIÀ`S BALANCE SHEET: ANALYTICS AND

DYNAMICS OF EVOLUTION, November 2004, S. 16.

6. ^ Ananya Mukherjee Reed: Corporate Governance Reforms in India in

Journal of Business Ethics, Volume 37, Number 3 / May, 2002, p. 253.

7. ^ Sunil Kumar, Rachita Gulati: Did efficiency of Indian public sector banks
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 47-48.

8. ^ Panicos O. Demetriades, Kul B. Luintel: Financial Development, Economic

Growth and Banking Sector Controls: Evidence from India. in The Economic

Journal. Vol. 106, No. 435 (March 1996), pp. 359-374, p. 360.

9. ^ Alpana Killawala: “History of The Reserve Bank of India – Summary”,

Reserve Bank of India Press Release, 18.03.2006 (RBI), (.pdf)

10. ^ Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
RESERVE BANK OF INDIÀ`S BALANCE SHEET: ANALYTICS AND

DYNAMICS OF EVOLUTION, November 2004, S. 40.

11. ^ Sunil Kumar, Rachita Gulati: Did efficiency of Indian public sector banks
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 48.
12. ^ Chronology of Events, Developing the Markets: Seeds of Liberalisation-
1985 to 1991 (RBI)

13. ^ Amal Kanti Ray: India’s Social Development in a Decade of

Reforms: 1990–91/1999–2000 in Social Indicators Research, Volume 87,

Number 3 / July, 2008, p. 410.

14. ^ Ananya Mukherjee Reed: Corporate Governance Reforms in India in

Journal of Business Ethics, Volume 37, Number 3 / May, 2002, p. 257.

15. ^ Raghbendra Jha, Ibotombi S. Longjam: Structure of financial savings

during Indian economic reforms in Empirical Economics (2006) 31:861–869,

p.862.

16. ^ Sunil Kumar, Rachita Gulati: Did efficiency of Indian public sector banks
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 49,

17. ^ Chronology of Events, Crisis and Reforms- 1991 to 2000 (RBI)

18. ^ "RBI History – Spanning 7 Decades of Public Service". Rbidocs.rbi.org.in.

1935-04-01. Retrieved 2010-08-20.

19. ^ Security Printing &Minting Corporation of India, About Us (SPMCIL)

20. ^ Second Quarter Review of Monetary Policy for the Year 2009-10, Punkt
15., (RBI)

21. ^ Macroeconomic and Monetary Developments - Second Quarter Review

2009-10, S.94, (RBI), (.pdf)

22. ^ "About us, Organisation and Functions". RBI. Retrieved 2010-08-20.

23. ^ "History of Reserve Bank". Retrieved 2009-02-24.

24. ^ Dipak Basu: Balance-of-Payments Policies and Structural Reforms: an

Adaptive-Control Model for India in Journal of Economics, Volume 70 (1999),

No. 3, pp. 261-280, S.275.

25. ^ RBI, Frequently Asked Questions, Currency Matters (RBI)

26. ^ Samarjit Das, Kaushik Bhattacharya: Price convergence across regions in

India in Empirical Economics (2008) 34:299–313, S. 312.

27. ^ Alpana Sivam, Sadasivam Karuppannan: Role of state and market in

housing delivery for low-income groups in India in Journal of Housing and the

Built Environment 17: 69–88, 2002, S.85.

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Categories: Central banks | Buildings and structures in Mumbai | Economy of India | Organisations based in
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