INSIDE THE RESERVE BANK OF INDIA (RBI): UNDERSTANDING ITS BIRTH, ARCHITECTURE AND FUNDAMENTAL DUTIES
The Reserve Bank of India is the supreme institution of central banking. Therefore, it is in charge of the country's monetary policies and other financial systems. It has always been a trending topic since 1935, and it has become India's economic pillar and financial policy. Therefore, the journal paper will discuss the history creation, structure, and fundamental objective of the Reserve Bank of India.
The birth of RBI
Though the System of Reserve Bank of India was built up by the enactment of the Reserve Bank of India Act in 1934, the idea of having a central bank for India was mooted as early as 1921 by the Royal Commission on Indian Currency and Finance also referred to as the Hilton-Young Commission. The commission was set up to investigate the currency and monetary system prevalent in India and recommend for its betterment. It had not been accepted until the Royal Commission on Indian Currency and Finance 1926, known as the Chamberlain Commission, suggested it.
The papers of the commission led to the introduction of the RBI Act 1934, and RBI started on April 1st, 1935; it was privately owned, and its share capital was 5 crores, the shares of 100 rupees. Most of the shares Corporate were British and the Indian government had only 2 shares. The shares were reduced to 1 after nationalization on January 1st, 1949.
The architecture of RBI
RBI's headquarters in Mumbai is a unique piece of architecture. The British architects George Wittet and J.A. Fuller shaped the founding as a blend of European architectural style and indicators. The whole architecture was built using yellow Kurla stone. The central building in the middle towers is 15 stories above two wings on either side. The dome of the building is constructed according to the Gol Gumbaz in Bijapur; sculpted on top are figures of Indian deities and agriculture, a tribute to Hindustan's history and culture.
The modern-style building is not just for show but also a practical design. The central building hosts RBI's offices, and the identical wings include the bank's many departments' basements. There is also a printer and the bank's gold reserves. Full of windows for natural light and proper ventilation for optimal working comfort.
The functions of the Reserve Bank of India
RBI's Monetary Functions: The Reserve Bank of India handles most of the tasks related to money and the money supply. The following are the most crucial:
Currency management is the issuance of currency notes by the Reserve Bank of India and keeping a sufficient amount of money in the economy. It manages the issue and circulation of money. At the same time, it rejects banknotes that are worn out or spoiled.
Banker to the Government: The RBI acts like a banker to the government. It maintains the government's account, receives and pays monies, permits the transfer, and clears the cheques. In addition, it is a debt manager. It issues and manages government securities on behalf of the government.
Banker's Bank: The RBI performs a similar business, unlike the commercial banks and treats them like a customer. It keeps their money on deposit and lends freely to them as a surrogate for the ultimate source of funds in the event of a bank run. The RBI serves as a vigilant financial system and observer of banks, conducting independent oversight to ensure that banks are finally stable and protect investors.
Formulation of Monetary Policy: The RBI acts as the monetary authority, formulating and implementing the nation's monetary policy, influencing factors such as the money supply, inflation rates, credit availability, etc. The two primary instruments that manage interest rates and liquidity are the Repo and Reverse Repo Rate.
Foreign Exchange Management: The RBI manages the country's balance of forex reserves and protects the value of the Indian currency through international trade and business.
General functions of RBI
The General Functions of the RBI comprise functions that are essentially concerned with general regulation and promotion of the banking system in such a way as to achieve and sustain the health and growth of the banking system in the country. The major functions comprised in this category are:
Regulator of Banks: The Reserve Bank of India was authorized as a regulator of banks, the most intimidating one because the above-mentioned function is the most critical to maintaining the organization of the banking system: the United Nations human rights. Two functions concern licenses on banking business and regulation of these licenses to permit the operation of banks. The Reserve Bank also formulates policies and issues guidelines and ensures that they are adhered to. The Reserve Bank of India has laid down prudential norms, which are provided in three parts: capital adequacy, asset classification, and provisions to protect the health of banks. Further, the inspection and audit are conducted by the banks periodically or whenever the Reserve Bank is known or doubts that the bank is not following the guidelines laid down properly.
Promotional Functions: Besides the regulatory and organizational functions, the Reserve Bank of India performs numerous promotional functions to help the Indian economy expand and progress. The bank assists in the development of the financial inclusion process since it stimulates the development of banking services in unbanked or underbanked areas. The RBI is also involved in the progress of priority sectors, including agriculture, small-scale industries, and rural areas. This is achieved by legislation regulating credit flows and concessional finance. The primary purpose of these activities is to contribute to growth, lower income disparities, and guarantee all people of the nation have fair access to finance and banking services.
Conclusion
The Reserve Bank of India is a vital institution, embodying the complexity and comprehensiveness of the country's economic and financial agenda. From its historical creation to its architectural structure and implementation of its primary functions, this institution is a token of importance and reliance. As India and its course of economic development face new tasks and perspectives, we can anticipate the expanding significance of the RBI and its role in a new setting. The functions of the RBI are not confined to the mentioned directions.
The central bank is also engaged in several other activities, such as managing the country's payment and settlement space, heading financial literacy, and researching economic and financial matters. The contribution of the RBI in terms of nourishing financial stability and ensuring the country's economic growth is also crucial for India.
