Full Form of RBI – Reserve Bank of India
The full form of RBI is the Reserve Bank of India. The RBI is the central bank of the country established in the year 1935 under the reserve bank (Transfer to Public Ownership) Act, 1948, responsible for regulating the supply of the currency in the economy, its credit system and creating the financial stability in the country by using its monetary policies.
History of RBI
- The reserve bank of India was established in the year 1935 and is also called the nation’s Central bank. Before the establishment of the reserve bank of India, all of the functions as a central bank of the country were being performed by the imperial bank of India, which was established in the year 1921.
- In the year 1926, the royal commission on the Indian currency and finance gave its recommendation for the purpose of creating the central bank for India so that control of the currency and the credit can be separated from the government and banking facilities can be augmented in the whole of the country.
- After this recommendation and to give its effect, a bill was introduced in the legislative assembly, but the same was withdrawn after some time as there was disagreement among different persons. However, in 1933, the fresh bill was introduced after a recommendation through the white paper on the Indian constitutional reforms. This bill was then passed in 1934 after receiving the governor-general’s assent, and the reserve bank began its operation on April 01, 1935.
- After few years, in the year reserve bank was nationalized by India’s government under the reserve bank act, 1948, and RBI was taken over from the private shareholders by paying an appropriate amount of the compensation to them. Thus, India’s nationalization of the reserve bank took place in the year 1949, which started working as the government-owned bank from January 1, 1949. Presently, the head office of the reserve bank of India is located in Mumbai, Maharashtra.
Objectives of RBI
The following are the objectives of the Reserve Bank of India:
- Supervise and undertake various initiatives for the financial sector that consists of financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. , commercial banksCommercial BanksA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits., and non-banking financial companies.
- Regulation of the issue of the currency in the economy. This is an important objective of the RBI because in case there is no effective regulation of the currency, then it can affect the economy of the country in a negative manner.
- Maintenance of the reserve with the aim of securing the monetary stability, economic growth, and the exchange rate stability in the country.
- Operating the country’s currency as well as the credit system to its full advantage.
- Remain uninfluenced and free from the politics of the country so that all the decisions could be taken in an unbiased manner.
- Assisting in the planned development process of the economy of the country.
- Meeting the challenges in the economy by way of modernization of the monetary policy framework.
Functions of RBI
The following are the main functions of the Reserve Bank of India:
- Supervision and regulation of banking as well as non-banking financial institutions where the RBI sets the different parameters within which these institutions have to function and issues policy and guidelines in order to protect the interest of the investors along with providing the banking services to the public in an efficient and cost-effective manner.
- Management of the foreign exchange of the country by managing foreign exchange reserve, capital accountCapital AccountThe capital account refers to the general ledger that records the transactions related to owners funds, i.e. their contributions earnings earned by the business till date after reduction of any distributions such as dividends. It is reported in the balance sheet under the equity side as “shareholders’ equity.”, and current account and facilitating the development of the foreign exchange market.
- It is responsible for formulating and implementing monetary policies in the country and maintains financial stability among all the sectors in the economy.
- It is the issuer of the currency in the country as it is issued the currency and coins in the market and also destroys or exchanges currencies that it founds to be unfit for circulation in the economy.
- It performs the function of the development of the economy by promoting national banking and the financial objectives and ensuring that a sufficient amount of credit is available for productive economic sectors.
- Acts as the banker of the state and central government of the country as it performs the merchant bankingMerchant BankingMerchant Bank is a company that provides services like fundraising activities like IPOs, FPOs, loans, underwriting. They only deal with companies and businesses. for them and helps in determining the best way to raise money from the debt markets when the government requires finance.
- It maintains the banking accounts for all of the scheduled banks, enables settlement of the inter-bank transactions, acts as the lender of the last resort, and thereby, it is the chief banker for all banks.
- It regulates and supervises the system of the payment and its settlement.
Structure of RBI
The Reserve Bank of India is managed by the central board of directors, and it comprises of the official and non-official directors. The central board of directors is appointed by the government of India for the term of the four years. The official director includes the governor and the deputy governors. Also, there are four other directors in the RBI appointed from the local boards. Apart from the post of the governor and the deputy governor, another post in the RBI includes the Principle chief general manager, the Chief General Managers, the General Managers, the Deputy General Managers, the Assistant General Managers, the Managers, the Assistant Managers, and the other support staff.
RBI is the abbreviation used for the Reserve Bank of India. As the name implies, It is the central bank of India which began its operation on April 01, 1935. The primary objective of the Reserve bank of India is top regulates the different banking functions in the country with the focus on regulating the currency flow and credit system in the economy and conducting consolidated supervision of the financial sector of the country. It is managed by the central board of directors, which comprises of the official and non-official directors.
This has been a guide to the Full Form of RBI, i.e. (Reserve Bank of India). Here we discuss the history and functions of RBI with their objectives and structure. You may also have a look at the following articles-