Reserve Bank of India (RBI)

The RBI is the Central Bank of our country. It is the open Institution of India Financial and monetary system. RBI came into existence on 1st April, 1935 as per the RBI act 1935. But the bank was nationalised by the government after Independence. It became the public sector bank from 1st January, 1949. Thus, RBI was established as per the Act 1935 and empowerment took place in banking regulation Act 1949. RBI has 4 local boards basically in North, South, East and West – Delhi, Chennai, Calcutta, and Mumbai.

Functions of Reserve Bank of India

1. Traditional Functions
   • Issue of Currency Notes
   • Banker to other Banks
   • Banker to the Government
   • Exchange Rate Management
   • Credit Control Function
   • Supervisory Function
2. Developmental / Promotional Functions of RBI
   • Development of the Financial System
   • Development of Agriculture
   • Provision of Industrial Finance
   • Provisions of Training
   • Collection of Data
   • Publication of the Reports
   • Promotion of Banking Habits
   • Promotion of Export through Refinance
3. Supervisory Functions of RBI
   • Granting license to banks
   • Bank Inspection
   • Control over NBFIs
   • Implementation of the Deposit Insurance Scheme

Role of RBI in Credit Control

Probably the most important of all the functions performed by a central bank are that of controlling the credit operations of commercial banks. In modern times, bank credit has become the most important source of money in the country, relegating coins and currency notes to a minor position. Moreover, it is possible for commercial banks to expand credit and thus intensify inflationary pressure or contract credit and thus contribute to a deflationary situation. It is, thus, of great importance that there should be some authority which will control the credit creation by commercial banks. As controller of credit, the central bank attempts to influence and control the volume of Bank credit and also to stabilize business condition in the country.

1. General / Quantitative Credit Control Methods
   • Bank Rate Policy
   • Open market operations
   • Cash Reserve Ratio (CRR)
   • Statutory Liquidity Ratio (SLR)
   • Repo and Reverse Repo Rates
2. Selective / Qualitative Credit Control Methods
   • Ceiling on Credit
   • Margin Requirements
   • Discriminatory Interest Rate (DIR)
   • Directives
   • Direct Action
   • Moral Suasion