The Reserve Bank of India (RBI, Hindi: भारतीय रिज़र्व बैंक) is the central banking system of India and controls the monetary policy of the rupee as well as US$300.21 billion(2010) of currency reserves. The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934 and plays an important part in the development strategy of the government. It is a member bank of the Asian Clearing Union.
History
1935 - 1950
The central bank was founded in 1935 to respond to economic troubles after the first world war. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank
1950 - 1960
Between 1950 and 1960, the Indian government developed a centrally planned economic policy and focused on the agricultural sector. The administration nationalized commercial banks and established, based on the Banking Companies Act, 1949 (later called Banking Regulation Act) a central bank regulation as part of the RBI. Furthermore, the central bank was ordered to support the economic plan with loans.
1960 - 1969
As a result of bank crashes, the reserve bank was requested to establish and monitor a deposit insurance system. It should restore the trust in the national bank system and was initialized on 7 December 1961. The Indian government founded funds to promote the economy and used the slogan Developing Banking. The Gandhi administration and their successors restructured the national bank market and nationalized a lot of institutes. As a result, the RBI had to play the central part of control and support of this public banking sector.---rp
1969–1985
Between 1969 and 1980 the Indian government nationalized 21 banks. The regulation of the economy and especially the financial sector was reinforced by the Gandhi administration and their successors in the 1970s and 1980s. The central bank became the central player and increased its policies for a lot of tasks like interests, reserve ratio and visible deposits. The measures aimed at better economic development and had a huge effect on the company policy of the institutes. The banks lent money in selected sectors, like agri-business and small trade companies.
The branch was forced to establish two new offices in the country for every newly established office in a town. The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the effects.
1985–1991
A lot of committees analysed the Indian economy between 1985 and 1991. Their results had an effect on the RBI. The Board for Industrial and Financial Reconstruction, the Indira Gandhi Institute of Development Research and the Security & Exchange Board of India investigated the national economy as a whole, and the security and exchange board proposed better methods for more effective markets and the protection of investor interests. The Indian financial market was a leading example for so-called "financial repression" (Mackinnon and Shaw). The Discount and Finance House of India began its operations on the monetary market in April 1988; the National Housing Bank, founded in July 1988, was forced to invest in the property market and a new financial law improved the versatility of direct deposit by more security measures and liberalisation.
1991–2000
The national economy came down in July 1991 and the Indian rupee was devalued. The currency lost 18% relative to the US dollar, and the Narsimahmam Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio. New guidelines were published in 1993 to establish a private banking sector. This turning point should reinforce the market and was often called neo-liberal The central bank deregulated bank interests and some sectors of the financial market like the trust and property markets. This first phase was a success and the central government forced a diversity liberalisation to diversify owner structures in 1998.
The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks in July to interact with the capital market to reinforce their capital base. The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran Limited—in February 1995 to produce banknotes.
[edit]since 2000
The Foreign Exchange Management Act from 1999 came into force in June 2000. It should improve the foreign exchange market, international investments in India and transactions. The RBI promoted the development of the financial market in the last years, allowed online banking in 2001 and established a new payment system in 2004 - 2005 (National Electronic Fund Transfer). The Security Printing & Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and produces banknotes and coins.
The national economy's growth rate came down to 5,8% in the last quarter of 2008 - 2009 and the central bank promotes the economic development.
Structure
Central Board of Directors
The Central Board of Directors is the main committee of the central bank and has not more than 20 members. The government of the republic appoints the directors for a four year term.
Central Board of Directors
Name Position
Duvvuri Subbarao Governor
Shyamala Gopinath Deputy Governor
Anand Sinha Deputy Governor
K. C. Chakrabarty Deputy Governor
Subir Gokarn Deputy Governor
Y. H. Malegam Regional of the West
Suresh D. Tendulkar Regional of the East
U. R. Rao Regional of the North
Lakshmi Chand Regional of the South
H. P. Ranina Lawyer Supreme Court of India
Ashok S. Ganguly Chairman Firstsource Solutions Limited
Azim Premji Chairman WIPRO Limited
Kumar Mangalam Birla Chairman Aditya Birla Group of Companies
Shashi Rajagopalan Advisor
Suresh Neotia former Chairman Ambuja Cement Co.
A. Vaidyanathan Economist, Professor Madras Inst.
Man Mohan Sharma Chemist, Professor Mumbai University
D. Jayavarthanavelu Chairman Lakshmi Machine Works Limited
Sanjay Labroo CEO Asahi India Glass Ltd.
Sunanda padmanabhan Government representative
Ashok Chawla Government representative
Governors
The central bank had 22 governors since 04.01.1935. The regular term of office is a four years period, appointed by the national administration.
Supportive bodies
The Reserve Bank of India has four regional represantations: North in New Delhi, South in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five members, appointed for four years by the central government and serve - beside the advice of the Central Board of Directors - as forum for regional banks and to deal with delegated tasks from the central board. The institution has 22 regional offices.
The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD committee to control the financial institutions. It has four members, appointed for two years, and takes measures to strength the role of statutory auditors in the financial sector, external monitoring and internal controlling systems.
The Tarapore committee was setup by the Reserve Bank of India under the chairmanship of former RBI deputy governor S S Tarapore to "lay the road map" to capital account convertibility. The five-member committee recommended a three-year timeframe for complete convertibility by 1999-2000.
On 1 July 2006, in an attempt to enhance the quality of customer service and strengthen the grievance redressal mechanism, the Reserve Bank of India constituted a new department — Customer Service Department (CSD).
Offices and branches
The Reserve Bank of India has branch offices at most state capitals and at a few major cities in India[total of 18 places] - viz. Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, Patna, and Thiruvananthapuram. Besides it has sub-offices at Dehradun, Gangtok, Kochi, Panaji, Raipur, Ranchi, Shimla and Srinagar.
The Bank has also two training colleges for its officers, viz. Reserve Bank Staff College at Chennai and College of Agricultural Banking at Pune. There are also four Zonal Training Centres at Belapur, Chennai, Kolkata and New Delhi.
Main Functions
Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity through agriculture".
The RBI Regional Office in Delhi.
The RBI Regional Office in Kolkata.
Monetary Authority
The Reserve Bank of India is the main monetary authority of the country and beside that the central bank acts as the bank of the national and state governments. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. The national economy depends on the public sector and the central bank promotes an expensive monetary policy to push the private sector since the financial market reforms of the 1990s.
The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective redressal of complaints by bank customers. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has Sexto decide the design of the rupee banknotes as well as coins. Aoustin
Manager of exchange control
The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Issuer of currency
The bank issues and exchanges or destroys currency and coins not fit for circulation.The Objectives are giving the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development, because both objectives are diverse in themselves.
Developmental role
The central bank has to perform a wide range of promotional functions to support national objectives and industries. The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are results of the dominant part of the public sector.
Related functions
The RBI is also a banker to the Government and performs merchant banking function for the central and the state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to promote private real estate acquisition.
The institution maintains banking accounts of all scheduled banks, too.
There is now an international consensus about the need to focus the tasks of a central bank upon central banking. RBI is far out of touch with such a principle, owing to the sprawling mandate described above. The recent financial turmoil world-over, has however, vindicated the Reserve Bank's role in maintaining financial stability in India.
Further reading
Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by K. N. Raj. In: The Economic Journal. Vol. 59, No. 235 (Sep., 1949), pp. 436–438.
Findlay G. Shirras: The Reserve Bank of India. In The Economic Journal. Vol. 44, No. 174 (Jun., 1934), pp. 258–274.
Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE RESERVE BANK OF INDIÀ`S BALANCE SHEET: ANALYTICS AND DYNAMICS OF EVOLUTION, November 2004.
(source:wikipedia)
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