Reserve Bank of India (RBI): History, Composition, Organizational Structure, Facts

Reserve Bank of India

The reservoir of India that is the central bank of India and the regulatory agency which is responsible for the issue and supply of money in the entire nation is known as the Reserve Bank of India(RBI). The Reserve Bank of India was founded on April 1, 1935, and then is currently owned by the Ministry of Finance, Government of India. The bank was previously owned privately but was fully nationalized in 1949 and thereby controlled by the Ministry of Finance, Government of India. The headquarters of the Reserve Bank of India(RBI) is located in Mumbai, India. The current governor presiding over RBI is Shaktikanta Das, an IAS.

Reserve Bank of India (RBI): History, Composition, Organizational Structure, Facts

The Central bank is regarded as the banker’s bank which administers the financial sector including commercial banks, financial institutions, and non-banking finance companies (NBFC). There are miscellaneous functions that a central bank performs such as issuing currency, working as a bank of government and as a banker of numerous commercial banks, managing foreign exchange, functioning monetary policy, and so on. It works and facilitates the growth of the economy as a whole. As the regulatory organization, it supervises the Indian banking system and ensures financial stability and public confidence in the banking system.

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In 1935 after the first world war, the Reserve Bank of India was founded to tackle the economic troubles. It was based on the proposal of the Royal Commission on Indian Currency and Finance also termed as Hilton Young Commission. Further on the partition of India in August 1947, the bank served as Central Bank for Pakistan until June 1948. The Government of India conceded RBI as a central bank after its nationalization.

The RBI has four regional representatives such as:

  • New Delhi – North 
  • Chennai – South 
  • Kolkata – East 
  • Mumbai – West

Five members are formed as a representative who is appointed for four years by the central government on the recommendation of the Central board of directors. The central board of directors is the main committee of the Central bank consisting of a governor, not more than four deputy governors, four directors to represent the regional boards, two from the Ministry of Finance which is usually the Economic Affairs Secretary and Financial Services Secretary and ten additional directors from several fields.

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Since RBI acts as a reservoir of funds in the economy it also regulates various rates/ratios such as : 

  • Repo rate – the rate at which RBI lends money to commercial banks for a short term
  • Reverse Repo rate – the rate at which commercial banks lends money to the RBI for short term
  • Statutory liquidity ratio – assets that are to be maintained by commercial banks in the form of gold, cash, and approved securities.
  • Cash Reserve Ratio – the ratio of banks’ cash reserves balance with RBI concerning the bank’s net demand and liabilities to ensure liquidity and solvency of the scheduled banks.

The current bank rate is 4.25% with reserves amounting to 4669426 crore rupees. Interest on reserves determined for the current period is 3.35% 

Thus for the proper functionality of the economy, the RBI should govern and operate effectively and efficiently thereby prospering the economic structure of the nation.

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