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Hello everyone, hope you are doing well. In this blog, we will lean about Indian central bank i.e. RBI.

The Reserve Bank of India, chiefly known as RBI, is India’s central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for the control, issue and maintaining supply of the Indian rupee. It also manages the country’s main payment systems and works to promote its economic development. Now, let’s start with the history of Reserve Bank of India.

<h2 id="content-id-2016-0">History of RBI</h2>

Central Bank is a national bank which performs for country’s government and India’s central bank is Reserve Bank of India. RBI was established under The Reserve Bank of India Act, 1934 on the recommendations of Hilton Young (also known as Royal Commission) and RBI started its operations from 1 April, 1935. At the time of establishment its headquarters was located in Kolkata, later it was shifted to Mumbai in 1937. Formerly, RBI was performing functions of Central bank of Pakistan (up to 30 June, 1948) & Burma (up to April, 1947) also. Initially, RBI was constituted as a private shareholders’ bank with a fully paid-up share capital of Rs.5 crore. It was nationalised on January 1, 1949. At the time of Establishment, Accounting year of RBI was January to December but in 1940, it was changed to July to June. In 2020, it was again changed to April to March. 

<h2 id="content-id-2016-1">Interesting facts about RBI</h2>

<table cellspacing="0" class="Table" style="border-collapse:collapse; border:none; margin-left:21px">
	<tbody>
		<tr>
			<td>
			RBI Logo
			</td>
			<td>
			Tiger & Palm Tree
			</td>
		</tr>
		<tr>
			<td>
			1st Governor of RBI
			</td>
			<td>
			Osborne Smith (1 April 1935 – 30 June 1937)
			</td>
		</tr>
		<tr>
			<td>
			1st Indian Governor of RBI
			</td>
			<td>
			C D Deshmukh (11 Aug 1943 – 30 June 1949)
			</td>
		</tr>
		<tr>
			<td>
			Maximum Duration as RBI’s Governor
			</td>
			<td>
			Benegal Rama Rau (1 July 1949 –14 Jan 1957) (7 years, 197 days)
			</td>
		</tr>
		<tr>
			<td>
			Minimum Duration as RBI’s Governor
			</td>
			<td>
			Amitav Ghosh (15 Jan 1985 – 4 Feb 1985) 20 days
			</td>
		</tr>
		<tr>
			<td>
			25th Governor of RBI
			</td>
			<td>
			Shaktikanta Das (From 12 December 2018)
			</td>
		</tr>
	</tbody>
</table>

<h2 id="content-id-2016-2">Structure of RBI</h2>

Central Board of Directors:

The Board is constituted by co-opting four Directors from the Central Board as Members. The Deputy Governors of the Reserve Bank are ex-officio members. One Deputy Governor, traditionally, the Deputy Governor in charge of supervision, is nominated as the Vice-Chairman of the Board. The chronology of the directors is given below: Governor ⇒ Deputy Governors ⇒ Executive Directors ⇒ Principal Chief General Managers ⇒ Chief General Managers ⇒ General Managers ⇒ Deputy General Managers Assistant General Managers ⇒ Managers ⇒ Assistant managers ⇒ Support Staff

By 2023, the Governor of RBI is Shaktikanta Das and Deputy governors are M. K. Jain, Dr. M. D. Patra, M. R. Rao and T R Sankar.

Central Board of Directors consists of 21 members:

<ol>
	<li>Governor (1)</li>
	<li>Deputy Governor (4)</li>
	<li>Members from Finance Ministry representatives (Economic Affairs Secretary & Finance Secretary)(2)</li>
	<li>Government Nominated Directors (10)</li>
	<li>Directors from local boards (i.e. Mumbai, Kolkata, Chennai & Delhi) (4)</li>
</ol>

<h2 id="content-id-2016-3">Function of RBI</h2>

<ol>
	<li>Issuer of Currency: According to Sec 22 of RBI Act, 1934, RBI is the sole authority which controls the money flow in the market. RBI issues all currency notes except 1 Rupee note and coins. RBI issues currency following Minimum Reserve System. Denominations of Notes that can be issued by RBI are stated under Section 24 of RBI Act, 1934.</li>
	<li>Review Monetary Policy: RBI has the power to review Monetary Policy after every 2 months (bi- monthly). To control Inflation in the market RBI uses different tools of Monetary Policy.</li>
	<li>Banker and Debt Manager to Government (WMA): As banker to the Government, the Reserve Bank works out the overall funds position and sends daily advice showing the balances in its books, Ways and Means Advances (WMA) granted to the government and investments made from the surplus fund.</li>
	<li>Banker to Banks: RBI is the Lender of Last Resort to all scheduled commercial banks. The Reserve Bank provides Short-term loans and advances to banks, when necessary.</li>
	<li>Financial Regulation and Supervision: RBI keeps an Eye on banks so that they won’t fail in performing their functions, supervise and assist banks so that they can perform well and serve the economy. RBI monitors Bank frauds and overseeing issues in house-keeping in PSBs (Public Sector Banks) including reconciliation of entries in inter-branch and inter-bank accounts and balancing of books of accounts.</li>
	<li>FOREX Management: RBI is also a regulator of Foreign Exchange Reserve (FOREX) Management in India. It controls the inflow and outflow of foreign reserves and it also maintains the reserve of foreign currencies of different countries.</li>
	<li>Market Operations: Open Market Operations (OMOs) are purchase & sale of Government securities (G-Secs) by RBI on the Government’s behalf. In the situation of excess liquidity in the market, RBI issues these securities through Auctions.</li>
	<li>Payment & Settlement Systems: In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 (PSS Act). In terms of Section 4 of the PSS Act, no person other than the Reserve Bank of India (RBI) can commence or operate a payment system in India unless authorized by RBI. Banks are the part of PSS.</li>
</ol>

<h2 id="content-id-2016-4">Demonetization In India</h2>

Demonetization is a process of stripping a currency unit of its status as a legal tender. In other words, it means abolishing of Legal tender of Currency. Reasons of Demonetization can be to control Inflation, Black money in the market, etc. This table shows Demonetisation of currency in India:

<table cellspacing="0" class="Table" style="border-collapse:collapse; border:none; margin-left:25px">
	<tbody>
		<tr>
			<td>
			Year of Demonetization
			</td>
			<td>
			Denomination
			</td>
			<td>
			Governor
			</td>
		</tr>
		<tr>
			<td>
			1946
			</td>
			<td>
			Rs. 1000 & 10,000
			</td>
			<td>
			C D Deshmukh
			</td>
		</tr>
		<tr>
			<td>
			1978
			</td>
			<td>
			Rs. 1,000, 5,000 & 10,000
			</td>
			<td>
			I G Patel
			</td>
		</tr>
		<tr>
			<td>
			2016
			</td>
			<td>
			Rs. 500 & 1,000
			</td>
			<td>
			Urjit Patel
			</td>
		</tr>
	</tbody>
</table>

Hope you learned well. Stay tuned for more informative blogs.

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