The Reserve Bank of India (RBI) is the central banking
authority and the regulator of Indian Banking System. RBI draws its regulatory
powers from Reserve Bank of India Act, 1934 and the Banking Regulation Act,
1949. Banking regulation is not peculiar to India. Every country regulates its
banking system through some authority.
For example, the Bank of England regulates the banking
system in UK. Similarly, the Federal Reserve Board is the regulator of the
banking system in USA.
Important of Banking
Regulation –
A. Public confidence and trust
B. Investors’ interest
C. Fair and efficient financial markets
D. Adherence to rules.
Constitution of RBI
RBI was constituted under the Reserve Bank of India Act,
1934 and started functioning from 1 April, 1935. It is the oldest among central
banks operating in developing countries. Its headquarters are in Mumbai.
A. Ownership
RBI is a state-owned institute under the Reserve Bank
(Transfer of Public Ownership) of India Act, 1948. The Act empowers the Union
Government to issue such direction to RBI as is necessary in public interest. However,
the union Government must consult the Governor before issuing the directions.
B. Control
The control of RBI vests in the Central Board of Directors.
The Central Board of Directors compromise the Governor, 4 Deputy Governors and
15 Directors.
C. Appointment
The Union Government appoints the Governor and Four
Deputy Governors and also nominates the 15 Directors.
Objective of RBI
A. Monetary Stability
B. Financial Stability
C. Payment System
D. Credit Allocation
E. Price Stability
F. Development of Financial Markets
Function of RBI
A. Issue of Notes
B. Government’s Banker
C. Banker’s Bank
D. Development of the Financial System
E. Exchange Control
F. Monetary Control
