Economy: Reserve Bank of India
1) Establishment of RBI:
2) RBI's Preface:
“To regulate the issue of banknotes and to maintain reserves with a view to achieving monetary stability in India and for the country in general. To operate the currency and credit system in the best interest of India, to have a modern monetary policy framework to meet the challenges of a highly complex economy, to maintain price stability with the objective of growth in mind”
3) Central Board :
Official Director: | b) Non-official Director |
Full-time: Governor and up to four deputy governors | Nominated by the government: ten directors and two government officials from different regions Others: Four directors – one each from the four local boards |
4) Major Functions:
5) Annual Report:
6) Report on Trend and Progress of Banking in India:
7) Autonomy of the Reserve Bank:
Under Section 7(1) of the RBI Act, the Central Government, in consultation with the Governor of the Reserve Bank, can give such directions to the bank as may be necessary in the interest of the public. Subsequent to any such direction under section 7(2), the work of the Bank shall be delegated to a Central Board of Directors. This Board of Directors can exercise all the powers of the Bank and perform all the functions to be carried out by the Reserve Bank.
The Central Board of Directors shall have the powers of general superintendence and direction of the general affairs and business of the Bank, even in the absence of the Governor of the Reserve Bank and in his absence the Deputy Governor nominated by him under section 7(3). He will be able to exercise all the powers which are with the bank. However, there is no legal provision mandating the autonomy of RBI.
However, the RBI has always been viewed as an autonomous body, a composite body for all commercial banks – be it PSBs or private banks or foreign banks. It vests not only the powers to formulate monetary policy, but also the powers to oversee the working of all banks. For some time now, there has been a conflict between the Reserve Bank and the central government over the issue of autonomy of the central bank.
The main reasons for this are: RBI’s failure to check non-performing assets, the problem of lack of liquidity in the economy due to strict monetary policy, the corrective measures taken by the RBI to reform the banking system, which were not considered very positive by the government.
The Central Board of Directors shall have the powers of general superintendence and direction of the general affairs and business of the Bank, even in the absence of the Governor of the Reserve Bank and in his absence the Deputy Governor nominated by him under section 7(3). He will be able to exercise all the powers which are with the bank. However, there is no legal provision mandating the autonomy of RBI.
However, the RBI has always been viewed as an autonomous body, a composite body for all commercial banks – be it PSBs or private banks or foreign banks. It vests not only the powers to formulate monetary policy, but also the powers to oversee the working of all banks. For some time now, there has been a conflict between the Reserve Bank and the central government over the issue of autonomy of the central bank.
The main reasons for this are: RBI’s failure to check non-performing assets, the problem of lack of liquidity in the economy due to strict monetary policy, the corrective measures taken by the RBI to reform the banking system, which were not considered very positive by the government.
8) What is Monetary Policy Committee?
The Monetary Policy Committee (MPC), constituted by the Central Government under section 45ZB, determines the policy interest rate required to achieve the inflation target. Earlier this work was done by the Governor of the Reserve Bank. The Monetary Policy Department of the Reserve Bank assists this Committee in monetary policy formulation and contributes to the decision-making process on the policy repo rate, taking into account the views of all stakeholders in the economy and the analytical work of the Reserve Bank.
