The Reserve Bank of India

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The Reserve of Bank was established on Apr 1, 1935, under the Reserve Bank of India Act, 1934. The main objective of the Reserve of India is to control the issue of Bank notes and the maintenance of reserves to guarantee monetary stability in India and usually to operate the currency and credit system of India to its advantage. The Reserve Bank of India was established as a private shareholders bank. The Central office of Reserve Bank of India was initially located in Calcutta that was later shifted to Bombay.

The Reserve Bank of India was nationalized in the year 1949 througg the Reserve Bank Act, 1948 and all shares were transferred to Central Government. The Reserve bank of India is constituted for the management of currency and for carrying the company of banking under provisions of the Act. The general supervision and direction of the affairs of the Reserve Bank are entrusted with Central Board of Directors. The Central Board consists of Governor, Deputy Governor, Ten Director nominated by the Central Government and two government officials appointed by the Central Government.

A core function of the Reserve Bank in the last 75 years has been the formulation and implementation of monetary policy to maintain price stability and ensure sufficient flow of credit to productive sectors of the economy. The Reserve Bank designs and implements the regulatory policy framework for banking and non- banking financial institutions to provide people access to the banking system, protect depositors interest, and to maintain the general health of the financial system.

As the regulator and the supervisor of the banking system, the Reserve Bank has a fundamental role to play in assuring the safety and soundness of the system. Because of the importance of farm credit as a critical input to agriculture, Reserve Bank of India has played an essential role in creating a broad-based institutional framework for catering to the increasing credit needs of the sector. Agricultural policies in India have been reviewed every once in a while to maintain pace with the changing requirements of the agriculture sector, which forms an essential segment of the priority sector lending. The Indian economy has become one of the quickest growing emerging market economy and the Indian banking sector.

The Reserve Bank of India has taken steps to liberalize the financial system recognizing the importance of exports in the overall growth process of the economy. The Government of India and the Reserve Bank of India have, with time, taken several measures to ensure sufficient flow of credit towards export-related activities. Currently, exporters have the opportunity to avail of pre-shipment and post-shipment loan in foreign currency from banks in India. To encourage competition between banks and also to increase the flow of credit to the export sector, the Reserve Bank of India has relaxed rates of interest. RBI has also designed some guidelines for commercial Banks where the banks should independently evaluate the credit risk while issuing cards to persons.

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