Reserve Bank of India

Governor of
Reserve Bank of India

Raghuram Ganesh Rajan

since4 September 2013

Reserve Bank of India

Governors

History
19351950

The Reserve Bank of India was founded on 1 April 1935 to

respond to economic troubles after theFirst World War.[6]
RBI was conceptualized as per the guidelines, working
style and outlook presented by Dr.B. R. Ambedkaras
written in his book "The Problem of the Rupee Its origin
and its solution." in front of the Hilton Young
Commission.The bank was set up based on the
recommendations of the 1926 Royal Commission on Indian
Currency and Finance, also known as the HiltonYoung
Commission.[7]The original choice for the seal of RBI was
The East India CompanyDouble Mohur, with the sketch of
the Lion and Palm Tree. However it was decided to replace
the lion with the tiger, the national animal of India.

The Preamble of the RBI describes its basic functions

to regulate the issue of bank notes, keep reserves to
secure 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 RBI
was established in Calcutta (now Kolkata), but was
moved to Bombay (now Mumbai) in 1937. The RBI
also acted as Burma's central bank, except during
the years of theJapanese occupation of Burma
(194245), until April 1947, even though Burma
seceded from the Indian Union in 1937. After the
Partition of Indiain 1947, the bank served as the
central bank forPakistanuntil June 1948 when the
State Bank of Pakistancommenced operations.
Though set up as a shareholders bank, the RBI has
been fully owned by theGovernment of Indiasince
its nationalization in 1949.

 19601969

The Indian government found funds to promote the

economy and used the slogan "Developing Banking".
19691985

In 1969, theIndira Gandhi-headed government nationalized

14 major commercial banks. Upon Gandhi's return to power
in 1980, a further six banks were nationalized. [7]The
regulation of the economy and especially the financial
sector was reinforced by the Government of India in the
1970s and 1980s. The central bank became the central
player and increased its policies for a lot of tasks like
interests, reserve ratio and visible deposits. The branch was
forced to establish two new offices in the country for every
newly established office in a town. Theoil crisesin 1973
resulted in increasinginflation, and the RBI restricted
monetary policy to reduce the effects.

Monetary Policy
GOALS:
Primarily price stability, while keeping in mind the
objective of growth.
In India, subsequent to the recommendations of the Dr.
Urjit Patel Committee Report, the Reserve Bank has
formally announced a glide path for disinflation that sets
an objective of below 8 per cent CPI inflation by January
2015 and below 6 per cent CPI inflation by January 2016.
The agreement on Monetary Policy Framework between
the Government and the Reserve Bank of India dated
February 20, 2015 defines the price stability objective
explicitly in terms of the target for inflation as measured
by the consumer price index-combined (CPI-C) in the
near to medium-term, i.e., (a) below 6 per cent by January
2016, and (b) 4 per cent (+/-) 2 per cent for the financial
year 2016-17 and all subsequent years.

Price stability is a necessary (if not sufficient)

precondition to sustainable growth and

financial stability. The relative emphasis
assigned to price stability and growth
objectives in the conduct of monetary policy
varies from time to time depending on the
evolving macroeconomic environment.
Financial stability is important for smooth
transmission of monetary policy and,
therefore, regulatory and financial market
policies, including macro-prudential policies,
are often announced along with monetary
policy under Part-B of monetary policy
statements.

Major Functions
Monetary Authority
Monetary authority or monetary policy refers to the use of
instruments under RBI control to regulate availability, cost and user of
money and credit and providing the citizens the appropriate available
monetary facilities. Central bank does this to maintain pricing stability,
low & stableinflationas well as promoting economic growth of country.
1. Issuer of Currency
2. Banker and Debt Manager to Government
3. Banker to Banks
4. Regulator of the Banking System
5. Manager of Foreign Exchange
6. Regulator and Supervisor of the Payment and Settlement
Systems

Currency and Reserves

Currency Indian Rupee

Reserves US$351.92 billion

Fundamental Objectives of the Reserve Bank of India!

The Preamble to the Reserve Bank of

India Act, 1934 spells out the objectives of
the Reserve Bank as: to regulate the issue
of Bank notes and the 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.

Role of RBI in Economic

Development
Development of banking system
Development of financial institutions
Development of backward areas
Economic stability
Economic growth
Proper interest rate structure
Miscellaneous