Functions of RBI

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1. Monetary Authority

  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors and financial stability with growth rate in mind
2. Regulator and supervisor of the financial system:
  • Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.
(Create public trust on Bank)
3. Regulator and supervisor of the payment systems (Cheque, DD & UPI etc.)
  • Authorises setting up of payment systems.
  • Lays down standards for operation of the payment system.
  • Issues direction, calls for returns/information from payment system operators.
4. Manager of Foreign Exchange
  • Manages 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.
5. Issuer of currency
  • Issues and exchanges currency and coins and destroys it when it is not fit for circulation.
  • Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.
6. Developmental role
  • Performs a wide range of promotional functions to support national objectives. Ex Agricultural Support policies.
7. Banker and debt manager to the Government
  • Performs merchant banking function for the central and the state governments(G-secs); also acts as their banker and public debt management.
Recommended to create new Independent debt management Body.
8. Banker to banks
  • Enabling smooth, swift and seamless clearing and settlement of inter-bank obligations.
  • Providing an efficient means of funds transfer for banks. (RTGS).
  • Enabling banks to maintain their accounts with RBI for purpose of statutory reserve requirements and maintain transaction balances.
  • Acting as lender of the last resort – BR, LAF, MSF.
  • RBI provides loans and advances to banks and financial institutions.
9. Controller of Credit
  • It controls the credit operations of banks through quantitative and qualitative controls (Ref Monitory policy tools).
10. Publication of Economic and Statistical Information:
  • The central bank collects periodical economic and statistical information relating to different aspects of the economy and publishes periodical reports. This provides valuable information regarding the functioning of the economy. This also enables the government to formulate appropriate economic policies to promote economic development.

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