Reserve Bank of India (RBI) is India’s central bank. It controls the monetary policy concerning the national currency, the Indian rupee.
Its basic functions are the issuance of currency, to sustain monetary stability in India, to operate the currency, and maintain the country’s credit system.
The concept of Reserve Bank of India was based on the strategies formulated by Dr. Ambedkar in his book named “The Problem of the Rupee – Its origin and its solution”.
This central banking institution was established based on the suggestions of the “Royal Commission on Indian Currency & Finance” in 1926. This commission was also known as Hilton Young Commission.
It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
In 1949,RBI was nationalized and became a member bank of the Asian Clearing Union.Though originally privately owned, since nationalization, it is fully owned by the Government of India.
It is an institution of national importance and the pillar of the surging Indian economy. It is a member of the International Monetary Fund (IMF).
RBI works as: Monetary Authority, Regulator and Administrator of the Financial System, Managing Foreign Exchange, Issuer of currency in India.
The Preamble of the Reserve Bank of India is:
To regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.
To have a modern monetary policy framework to meet the challenge of an increasingly complex economy.
To maintain price stability while keeping in mind the objective of growth.
RBI’s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.The directors are appointed/nominated for a period of four years.
The Central Board consists of:Governor, 4 Deputy Governors, 2 Finance Ministry representatives, 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai, and New Delhi
The First Governor of RBI was Sir Osborne Smith and the First Indian Governor of RBI was C D Deshmukh.