The Reserve Bank Of India - Part I

The Reserve Bank of India or, RBI, as we so often call it is India’s ‘central bank’; it represents India’s financial/industrial identity in the world.

I however like to call it the ‘Godfather’ of the Banks and the Economy – pulling the strings whenever required!

RBI is the formidable institution that holds our country’s banking/economy/industry sectors all together and geared towards growth and development – let me correct myself – ‘sustainable’ growth and development, as our current Guv’nor so aptly puts it!
                      

1. Brief Introduction and History:

• RBI as India’s central bank was conceptualized and put forward by the Hilton Young Committee in 1926 -27. 
• In 1933, based on Hilton Young Committee’s Reports and further improvinh upon it, the ‘Central Banking Investigation Committee’s’ report was presented and passed in the assembly. 
• 1934, saw the Reserve Bank Of India Act, 1934 being passed. 
• 1935, April 1st, RBI started its operations, with its head quarter in Calcutta. 
• 2 years later, in 1937, the Headquarter was permanently shifted to Bombay, (now Mumbai), where it still exists. (all of this happened during the British Rule!) 
• RBI was nationalized in 1949, 2 years after Independence; the Governor at the time was C. D. Deshmukh. 
• In 1985 RBI celebrated 50 years of its existence; 75 years in 2010 and 100 years in 2035!

2. Role as Central Bank – What does RBI do?

• RBI is the Government’s banker and performs banking functions for the central and the state governments. 
• RBI is also the Banker of the Banks - it maintains operational banking accounts of all scheduled banks. 
• It is the regulator and supervisor of the country’s financial system; 
• and sets benchmarks and regulations for the proper operation of the country’s banking and financial sector. 
• RBI is the Issuer of Currency – it issues bank notes and exchanges or destroys currency notes and coins not fit for circulation. 
• RBI is instrumental in formulating, implementing and monitoring the country’s monetary policies; ‘monetary policies’ are set of policies formulated by the central bank to attempt to control the economy, the money supply and ultimately inflation. 
• Through the provisions of the Foreign Exchange Management Act, 1999, RBI regulates and facilitates external trade and promotes development and maintenance of foreign exchange market in India – through which India maintains its forex reserves. 
• RBI’s monetary policies are instrumental in maintaining price stability in the economy – RBI has battled inflationary trends in the Indian Economy. (We’ll cover it in another discussion!) 
• It also acts as an advisor to the Government of India from economic point of view. 
• It is the like the ‘Godfather’ of the public’s money, (albeit the sinister intentions! – RBI is all good!) of the entire banking system and hence the protector of common public’s deposits, the influence behind loan rates, the policy maker for financial inclusion, the inflation checker etc 

3. The Governor, The Deputies and the Board:

4. Trivia:

• The first Governor of RBI was Sir Osborne Smith (under the British Government); first Indian Governor is Sir C. D. Deshmukh. Raghuram Rajan is the 23rd Governor (current Guv’nor) and ex- PM Manmohan Singh was the 15th Governor!
• The Banking Ombudsman Scheme 2006, has been formulated by RBI for the effective addressal of customer complaints; the Banking Ombudsman Act, 2005.
• RBI prints notes through, the Bharatita Reserve Bank Note Mudran Private Limited and Security Printing and Minting Corporation of India Limited – a wholly owned company of the Government of India.
• RBI decides the design of currency notes and coins.
• RBI’s logo/emblem/seal is of a palm tree and a tiger.
• RBI has started publishing bi-monthly policy updates since April 2014; it’s latest was in September 2014 being the 4th bi-monthly update.
• RBI is a member of the Asian Clearing Union.
• It is also a member of the Alliance For Financial Inclusion.
• RBI was conceptualized as per the vision envisaged by Dr. B. R. Ambedkar in his book – “The Problem of the Rupee – Its origin and its solution”.
• RBI has served as the central banks of Burma and Pakistan for brief period of time.
• RBI has a site named ‘paisaboltahai’! – launched in 2012 to make the masses aware of the features of currency notes to make them vigilant and an aid in the fight against counterfeit notes.
• RBI is currently withdrawing all the pre-2005 notes from the system as a measure to combat the twin maladies of counterfeit notes and black money.

Friends this piece was from interview and exam purpose – the more important and relevant discussion from GD point of view will be on ‘RBI and Inflationary Trends’ and the impacts of various ratios!

Giving you guys a breather for a day or two and the Part II will be up soon!

Till then may the force be with you!

Good day!