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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 nationalisation in 1949, the Reserve Bank
is fully owned by the Government of India.
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve
Bank as:
"...to regulate the issue of Bank Notes and keeping of reserves
with a view to securing monetary stability in India and generally to operate the
currency and credit system of the country to its advantage."
The Reserve Bank's affairs are governed by a central board of directors. The board
is appointed by the Government of India in keeping with the Reserve Bank of India
Act.
Functions : General superintendence and direction of the Bank's affairs
- One each for the four regions of the country in Mumbai, Calcutta, Chennai and New
Delhi
- Membership:
- consist of five members each
- appointed by
the Central Government
- for a term of four years
Functions : To advise the Central Board on local matters and to represent territorial
and economic interests of local cooperative and indigenous banks; to perform such
other functions as delegated by Central Board from time to time.
The Reserve Bank of India performs this function under the guidance of the Board
for Financial Supervision (BFS). The Board was constituted in November 1994 as a
committee of the Central Board of Directors of the Reserve Bank of India.
Objective
Primary objective of BFS is to undertake consolidated supervision of the financial
sector comprising commercial banks, financial institutions and non-banking finance
companies.
Constitution
The Board is constituted by co-opting four Directors from the Central Board as members
for a term of two years and is chaired by the Governor. The Deputy Governors of
the Reserve Bank are ex-officio members. One Deputy Governor, usually, the Deputy
Governor in charge of banking regulation and supervision, is nominated as the Vice-Chairman
of the Board.
BFS meetings
The Board is required to meet normally once every month. It considers inspection
reports and other supervisory issues placed before it by the supervisory departments.
BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory
audit and internal audit functions in banks and financial institutions. The audit
sub-committee includes Deputy Governor as the chairman and two Directors of the
Central Board as members.
The BFS oversees the functioning of Department of Banking Supervision (DBS), Department
of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID) and
gives directions on the regulatory and supervisory issues.
Functions
Some of the initiatives taken by BFS include:
- restructuring of the system of bank inspections
- introduction of off-site surveillance,
- strengthening of the role of statutory auditors and
- strengthening of the internal defences of supervised institutions.
The Audit Sub-committee of BFS has reviewed the current system of concurrent audit,
norms of empanelment and appointment of statutory auditors, the quality and coverage
of statutory audit reports, and the important issue of greater transparency and
disclosure in the published accounts of supervised institutions.
Current Focus
- supervision of financial institutions
- consolidated accounting
- legal issues in bank frauds
- divergence in assessments of non-performing assets and
- supervisory rating model for banks.
I. Acts administered by Reserve Bank of India
- Reserve Bank of India Act, 1934
- Public Debt Act, 1944/Government Securities Act, 2006
- Government Securities Regulations, 2007
- Banking Regulation Act, 1949
- Foreign Exchange
Management Act, 1999
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (Chapter II)
- Credit Information Companies(Regulation) Act, 2005
- Payment and Settlement Systems Act, 2007
- Factoring Regulation Act, 2011
II. Other relevant Acts
- Negotiable Instruments Act, 1881
- Bankers' Books Evidence Act, 1891
- State Bank of India Act, 1955
- Companies Act, 1956/ Companies Act, 2013
- Securities Contract (Regulation) Act, 1956
- State Bank of India Subsidiary Banks) Act, 1959
- Deposit Insurance and Credit Guarantee Corporation Act, 1961
- Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
- Regional Rural Banks Act, 1976
- Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
- National Bank for Agriculture and Rural Development Act, 1981
- National Housing Bank Act, 1987
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993
- Competition Act, 2002
- Indian Coinage Act, 2011 : Governs currency and coins
- Banking Secrecy Act
- The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
- The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
Monetary Authority:
- Formulates, implements and monitors the monetary policy.
- Objective: maintaining price stability and ensuring adequate flow of credit to productive
sectors.
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.
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.
Issuer of currency:
- Issues and exchanges or destroys currency and coins not fit for circulation.
- Objective: to give the public adequate quantity of supplies of currency notes and
coins and in good quality.
Developmental role
- Performs a wide range of promotional functions to support national objectives.
Related Functions
- Banker to the Government: performs merchant banking function for the central and
the state governments; also acts as their banker.
- Banker to banks: maintains banking accounts of all scheduled banks.
Has five training establishments
- Two, namely, College of Agricultural Banking and Reserve Bank of India Staff College
are part of the Reserve Bank
- Others are autonomous, such as, National Institute for Bank Management, Indira Gandhi
Institute for Development Research (IGIDR), Institute for Development and Research
in Banking Technology (IDRBT)
For details on training establishments, please check their websites links for which
are available in Other Links.
Fully owned:
Deposit Insurance and Credit Guarantee
Corporation of India(DICGC), Bharatiya
Reserve Bank Note Mudran Private Limited(BRBNMPL)
Majority stake:
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