Functions of Reserve Bank of India
Issues of Notes:
The Reserve Bank of India (RBI) is responsible for the issuance of currency notes in India. It issues currency notes on behalf of the government and manages the supply and distribution of currency in the economy. The RBI ensures that there is an adequate supply of clean and genuine currency notes in circulation to meet the demand of the public.
Banker to the Government:
The RBI acts as a banker to the central and state governments of India. It performs various functions, such as managing the government’s accounts, receiving and making payments on behalf of the government, and managing the government’s borrowing program. The RBI also manages the government’s foreign exchange reserves and conducts transactions on behalf of the government.
Banker’s Bank:
The RBI is also known as the banker’s bank, as it provides banking services to other banks and financial institutions in India. It acts as a lender of last resort and provides funds to banks in times of liquidity crunch. It also regulates and supervises the banking system in India, issues licenses to new banks, and sets regulations and guidelines for banks to follow.
Controller of Credit:
The RBI is responsible for controlling the credit in the economy. It uses various monetary policy tools, such as changing the policy interest rates, reserve ratios, and open market operations, to regulate the liquidity in the economy and achieve its objectives of price stability and economic growth. The RBI also monitors the credit flow to various sectors of the economy and takes corrective measures to ensure that credit is directed towards productive sectors.
Custodian of Foreign Reserves:
The RBI manages the foreign exchange reserves of India, which include foreign currencies, gold, and special drawing rights (SDRs). The RBI uses these reserves to maintain the external value of the Indian rupee and to provide a cushion against external shocks. It also conducts transactions in the foreign exchange market to ensure the stability of the rupee.
Other Functions:
Apart from the above functions, the RBI also performs various other functions, such as promoting financial inclusion, developing the financial markets in India, regulating and monitoring the payment and settlement systems, conducting research and analysis on economic and financial issues, and promoting the use of digital payment systems and other electronic modes of payment.
In conclusion, the Reserve Bank of India performs a wide range of functions, including issuing of notes, acting as a banker to the government, providing banking services to other banks, controlling the credit in the economy, managing the foreign exchange reserves, and performing other functions to promote financial stability and economic growth in the country.
