Structure and Functions of RBI – Banking Awareness

Structure and Functions of RBI: RBI is the central bank of India and in this article, we will be discussing the Structure and Functions of RBI. The topic is important for various banking exams like IBPS PO, IBPS Clerk, NABARD, RBI Grade B, SBI, SBI PO, SBI CBO, JAIIB, CAIIB but also important for other Government recruitment exams like SSC, UPSC, etc.

Structure and Functions of RBI

Reserve Bank of India (RBI)

The Reserve Bank of India 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.

Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.

Structure of RBI

Central Board

The Reserve Bank’s affairs are governed by a central board of directors. The Central Board of Directors is the apex body in the governance structure of the Reserve Bank. There are also four Local Boards for the Northern, Southern, Eastern and Western areas of the country which take care of local interests. The central government appoints/nominates directors to the Central Board and members to the Local Boards in accordance with the Reserve Bank of India (RBI) Act. The composition of the Central Board is enshrined under Section 8(1) of the RBI Act, 1934.

The Central Board consists of:

  • The Governor
  • 4 Deputy Governors of the Reserve Bank
  • 4 Directors nominated by the central government, one from each of the four Local Boards as constituted under Section 9 of the Act
  • 10 Directors nominated by the central government
  • 2 government officials nominated by the central government

The Central Board is assisted by three committees:

  1. The Committee of the Central Board (CCB)
  2. The Board for Financial Supervision (BFS)
  3. The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)

Functions of RBI

  • Monetary Authority

The Reserve Bank of India being the central bank of the country is the monetary authority of India and the sole authority vested with the power to issue currency notes, regulate the supply of currency and credit in the economy to secure monetary and price stability.

  • Regulate & Supervise Financial Stability and Financial inclusion

It is also the responsibility of RBI to regulate & supervise the banking sector with an eye on securing financial stability and financial inclusion.

  • Currency Management

Currency Management is the process of managing the life cycle of the notes, which includes:

  • Assessing the printing requirement of various denominations of notes,
  • Placing indents with the note printing presses,
  • Supplying and distributing adequate quantity of currency throughout the country
  • Ensuring the quality of banknotes in circulation by continuous supply of clean notes and timely withdrawal of soiled notes.

Section 23 of the RBI Act, 1934, had mandated that the function of issuance of banknotes (above 1 Rupee) is to be conducted by the RBI through a separate department called the Issue Department.

  • Foreign Exchange Management

The Reserve Bank oversees the foreign exchange market in India. It supervises and regulates it through the provisions of the Foreign Exchange Management Act (FEMA), 1999.

  • Banker to Banks

RBI also act as a banker to banks and Governments by maintaining their accounts and carrying out transactions on their behalf as well as providing them banking services.

  • Banker to Government

Managing the Government’s banking transactions is one of the key functions of the RBI. Like individuals, businesses and banks, Governments too need a banker to carry out their financial transactions in an efficient way, including the raising of resources from the public. Since its inception, the RBI has undertaken the traditional central banking function of managing the Government’s banking transactions. The central bank also serves as an agent and adviser to the Government.


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  • Regulate and Supervise the financial system

Financial system in India is carried out by different regulatory authorities. The Reserve Bank regulates and supervises the major part of the financial system. The supervisory role of the Reserve Bank involves commercial banks, Urban Co-operative Banks (UCBs), certain Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs). Some of the FIs, in turn, regulate and/or supervise other institutions in the financial sector.

In addition to these, the Reserve Bank of India also represents India at the International Monetary Fund (IMF), promotes the growth of the economy, act as a lender of last resort to commercial banks, strengthen and support small local banks and encourage banks to open branches in rural areas, publish economic data, etc.

Read Subsidiaries of RBI

Current Governor of RBI

The current governor of RBI is Shaktikanta Das. In addition to Governor, the RBI has four deputy governors who are T.Ravi Shankar, M.K. Jain, Dr. M. D. Patra, M. Rajeshwar Rao.

Sample Questions: Structure and Functions of RBI

Q1. Which of the following is not the function of RBI?

  1. Banker to banks and Government, lender of the last resort
  2. Credit Management
  3. Accepting deposits and making loans from public
  4. Regulating Currency
  5. None of the above

Solution: 3. Accepting deposits and making loans from public

Q2. When was the Reserve Bank of India nationalized?

  1. 1935
  2. 1947
  3. 1948
  4. 1949
  5. 1960

Solution: 4. 1949

That is all from us in this blog. Hope you find the information useful.

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