Structure & Functions of RBI, Check Regulatory Study Notes

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Structure & Functions of RBI

Structure and Functions of RBI: The Reserve Bank of India (RBI) is the central bank of India and the regulatory body who is responsible for the regulation of the Indian Banking System. RBI works to promote economic development in the country by managing country’s main payment systems. For every aspirant who is preparing for banking and regulatory exams must know about the Structure & Functions of RBI in detail, so go through the complete blog.


Structure & Functions of RBI – Complete Notes

Before moving on to the Structure & Functions of RBI, let us know what is RBI, when was RBI established, where was RBI’s first central office, what does central office refer to, when did RBI’s office got shifted to Mumbai, etc.

Reserve Bank of India (RBI)

Let’s check out the answers to the above RBI related questions in the following pointers:

  • The RBI was established on April 1, 1935 in accordance with the provisions of the RBI Act, 1934.
  • The Central Office of the RBI was initially established in Kolkata but then it was permanently moved to Mumbai in the year 1937.
  • The Central Office is where the Governor sits and where policies are formulated.
  • RBI was nationalized in 1949 and since then it is fully owned by Government of India (GOI).

Structure of RBI

We have shared the complete structure of RBI below. Also know that every year, RBI Grade B Notification is released wherein candidates can fill up the forms, and sit for the exam. If the candidate clear all three phases of selection process, then he/she is selected as RBI Grade B Officer.

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

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The Central Board is assisted by three committees:

  • The Committee of the Central Board (CCB)
  • The Board for Financial Supervision (BFS)
  • The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)
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Functions of RBI

Check out the below given points to know the Functions of RBI in detail:

  • 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:
  1. Assessing the printing requirement of various denominations of notes,
  2. Placing indents with the note printing presses,
  3. Supplying and distributing adequate quantity of currency throughout the country
  4. 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.

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  • 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.
  • 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.

Current Governor of RBI

Shri Shaktikanta Das, IAS Retd., former Secretary, Department of Revenue and Department of Economic Affairs, Ministry of Finance, Government of India assumed charge as the 25th Governor of the Reserve Bank of India effective December 12, 2018.

Structure & Functions of RBI – Sample Questions

Q. 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

Answer: Accepting deposits and making loans from public

Q. When was the Reserve Bank of India nationalized?

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

Answer: 1949

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