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what is Central Bank in India and its functions

what is Central Bank in India and its functions

what is Central Bank in India and its functions Financial institution responsible for issuing currency, managing foreign reserves,implementing monetary policy, and providing banking services to the government and commercial banks RBI is the central bank of India.

Several attempts were made from time to time to set up a central bank in India prior to 1934.But unfortunately these attempts failed to bear any fruit in 1921 the government of India established the imperial bank of India to serve as the central bank of the country.But the imperial bank did not achieve any appreciable success in its functioning as the central bank of the country.But the imperial bank did not achieve any appreciable success in its functioning as the central bank of the country. In 1925 the commission made out.In 1925, a commission which is named as  the Hilton Young Commission was asked by the Government to express its points  on the banking subject. The commission strenuously  formation of a brand new Central Bank in the country. According to the Commission, it was not considerable  to keep the control of currency and credit in the hands of two separate agencies. The Government of India controlled currency while the Imperial Bank regulated credit prior to the formation of the Reserve Bank of India in April 1st, 1935. The Hilton Young Commission did not desire this double control on currency and credit as a desirable feature of the Indian monetary system.

The Reserve Bank of India is the guru  of the Indian money market.It issues notes, buys and sells government securities, regulates the volume, direction and cost of credit, manages foreign exchange and acts as banker to the government and banking institutions.

The Reserve Bank is playing an active role in the development activities by helping the establishment and working of specialized institutions, providing term finance to agriculture, industry, housing and foreign trade. In spite of many criticisms, it has successfully controlled commercial banks in India and has helped in evolving a strong banking system. A study of the Reserve Bank of India will be useful, not only for the examination, but also for understanding the working of the supreme monetary and banking authority in the country.

Organizational structure of the Reserve Bank

  • The Central Board of Directors
  • Local Boards The Reserve Bank of India

Central Board of Directors

the Central Board of Directors consists of 20 members as follows:

  • One Governor and four Deputy Governors: They are appointed by the Government of India for a period of five years. Their salaries, allowances and other perquisites are determined by the Central Board of Directors in consultation with the Government of India.
  • Four Directors Nominated from the Local Boards: There are four local Boards of Directors in addition to the Central Board of Directors. They are located at Mumbai, Kolkata, Chennai and New Delhi. The Government of India nominates one member each from these local Boards. The tenure of these directors is also for a period of five years.
  • Ten other Directors: The ten other directors of the Central Board of Directors are also nominated by the Government of India. Their tenure is four years.
  • One Government Official: The Government of India also appoints one Government Official to attend the meetings of the Central Board of Directors. This official can continue for any number of years with the consent of the Government, but he does not enjoy the right to vote in the meetings of the Central Board. The Central Board of Directors exercises all the powers of the bank. The Central Board should meet at least six times in each year and at least once in three months.

Local Boards

The Reserve Bank of India is divided into four regions: the Western, the Eastern, the Northern and the Southern regions. For each of these regions, there is a Local Board, with headquarters in Mumbai, Kolkata, New Delhi and Chennai. Each Local Board consists of five members appointed by the Central Government for four years. They represent territorial and economic interests and the interests of co-operative and indigenous banks in their respective areas. In each Local Board, a chairman is elected from amongst their members. Managers in-charge of the Reserve Bank’s offices in Mumbai, Kolkata, Chennai and New Delhi are ex-officio Secretaries of the respective Local Boards at these places.

 

what are fuctions of reserve bank of India

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