RESERVE BANK OF INDIA (RBI)
The basic elements of the Indian financial system were established during the British rule (1757-1747).
The RBI came into existence on 1 April 1935, as a privately owned bank with only 5 percent shares of the Government of India and a share capital of Rs. 5 crores (the share capital is still Rs. 5 crores) in accordance with the provision of the Reserve Bank of India Act, 1934. The bank was originally constituted as a shareholder’s institution on the model of leading foreign central banks of the time. The bank’s share capital of Rs. 5 crores was divided into 5 lakh fully paid-up share of Rs. 100 each. The entire share capital was, in the beginning, owned by private shareholders with the exception of 2,200 shares, which were allotted to the Central Government. It was in February 1947, that the decision to nationalise the bank was taken and in terms of the RBI. As per the Transfer to Public Ownership Act 1948, the entire share capital was deemed to be transferred to the Central Government. From 1 January 1949, the RBI became a state-owned institution. The Act of 1948 empowered the Central Government to issue such directions to the bank as it might consider necessary in the public interest.
Organisation of Banks
The general superintendence and direction of the bank’s affairs are vested in the Central Board of Directors, which comprises:
1. A Governor and not more than four Deputy Governors appointed by the Central Government;
2. Four Directors nominated by the Central Government one from each of the four Local Boards;
3. Ten Directors nominated by the Central Government and
4. One government official nominated by the Central Government.
1. The First Governor Sir Osborne Arkall Smith (1935-37).
2. The First Indian Governor C. D. Deshmukh (1943-49).
The main functions of the RBI are broadly the same as those of other central banks all over the world.
These are as follows:
1. The RBI regulates the issue of bank notes above one rupee denominations. The Government of India issues one rupee notes and coins of all denominations below one rupee. The RBI undertakes distribution of all notes and coins on behalf of the government.
2. It acts as the banker of the Government of India and the state governments, commercial banks and state cooperative banks.
3. It formulates and administers the monetary policy.
4. It maintains the exchange value of rupee.
5. it represents India at the IMF.
6. It promotes the growth of the economy within the framework of the general economic policy of the government.
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