Reserve Bank of India Establishment The Reserve Bank of India was inaugurated on April 1, 1935 with a share capital

of Rs.5crores, divided capital was, in the beginning, owned by private shareholders. The Government of India held shares of nominal value of Rs.222000. But in view of the public nature of the Banks functions, the Reserve Bank of India, Act, 1934 provided for the appointment by the Central Government of the Governor and two Deputy Governors. The Act also contained provisions governing the holding of the shares and the rate of dividend to be paid to shareholders. The Reserve Bank was nationalized in 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, consisting of the Governor and four Deputy Governors, one Government official from the Ministry of finance, ten Directors nominated by the Central Government to represent the four local Boards. Besides the Central Board, there are four Local Boards with headquarters at Bombay, Calcutta, Madras and New Delhi. Local Boards consist of five members each appointed by the Central Government for a term of four years to represent territorial and economic interests and the interest of co-territorial and economic interests and the interests of cooperative and indigenous banks. Preamble The preamble of Reserve Bank of India describes the basic functions of the Reserve Bank as: ..To regulate the issue of Bank Notes and keeping of Reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. As the preamble of the RBI itself states to operate the currency and credit system of the country to its advantage hence bad money is been removed out of the circulation which will in turn provide good quality notes in the hands of the general public. The policies of the Reserve Bank of India are implemented with the help of Board of Directors.

Central Board A Central board of directors governs the Reserve Banks Affairs. The Government of India in keeping with the Reserve Bank of India Act appoints the board. Appointed/nominated for a period of Four Years Constitution: Official Directors Full-time: Governor and not more than four deputy Governors Non Official Directors Nominated by Government: ten directors from various fields and one Government Official Others: Four Directors one each from four local boards Functions: General Superintendence and direction of the Banks affairs

Main Functions: Monetary Authority: Formulates implements and monitors the monetary policy. Objective: Maintaining price stability and ensuring adequate flow of credit to productive sectors. Regulator and supervisor of the Financial System: Prescribes broad parameters of banking operations within which the countrys banking and financial system functions. Objective: maintain public confidence in the system, protect depositors interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange: Manages 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. Issuer of Currency: Issues and exchanges or destroys currency and coins not fit for circulation. Objective: To give the public adequate quantity of supplies of currency notes and coins in good quality. Developmental Role Performs a wide range of promotional functions to support national objectives. Related Functions: Banker to the Government: Performs merchant banking function for the central and state governments; also act as their banker. Banker to banks: Maintains banking accounts of all scheduled banks. All the functions of the RBI are interlinked with each other as forex funds will be flowing into the country through NRI deposits, Foreign Institutional Investors, Foreign direct Investment, which will be utilized for the infrastructure development hence in turn RBI needs to infuse fresh currency into the system so that the maximum benefits can be availed from the available funds.