Reserve Bank of India RBI Profile www.deekpay.com

What is RBI?

RBI known as Reserve Bank of India is the central bank of India and started functioning on 1st April 1935 under the Reserve Bank of India Act. The RBI uses monetary policy to maintain financial stability in India and is responsible for regulating the monetary and credit systems of the country.

Reserve Bank of India RBI Functions

The Reserve Bank of India is located in Mumbai and serves the financial markets in a number of ways. The bank sets the overnight interbank lending rate. The Mumbai Interbank Offered Rate (MIBOR) is the benchmark for interest rate related financial instruments in India.

The main objective of the Reserve Bank of India (RBI) is to provide uniform supervision of the Indian financial sector comprising commercial banks, financial institutions and non-banking financial companies. Initiatives taken by the RBI include reorganisation of bank inspections, off-site supervision of banks and financial institutions and strengthening the role of auditors

First and foremost, the Reserve Bank of India formulates, implements and supervises monetary policy in India. The Bank's management objective is to maintain price stability and ensure the flow of credit to productive sectors of the economy. The Reserve Bank of India also manages all foreign exchange under the Foreign Exchange Management Act, 1999. The Act allows the Reserve Bank of India to facilitate foreign trade and payments in order to promote the development and health of the foreign exchange market in India.

The Reserve Bank of India acts as the regulator and supervisor of the entire financial system. This instils public confidence in the country's financial system, protects interest rates and provides the public with positive alternatives to banking. Finally, the Reserve Bank of India acts as the issuer of the national currency. For India, this means that currency is issued or destroyed depending on its suitability for current circulation. This provides the Indian public with a reliable supply of money in the form of notes and coins, which has been a long-standing problem in India.

Special Notes

The Reserve Bank of India was initially set up as a private entity but was nationalised in 1949. The Reserve Bank is managed by a central board of directors appointed by the central Government. The directors of the Reserve Bank of India have always been appointed by the Government, and this has been the case since the Reserve Bank of India Act stipulated that the Bank is wholly owned by the Government of India. The term of office of the directors is four years.

According to its website, the RBI's current focus is on continuing to strengthen the supervision of financial institutions while addressing legal issues related to bank fraud and merger accounting and trying to create a regulatory rating model for its banks.