Indian Economy:Reserve Bank of India


The Reserve Bank of India (RBI) was established under the Reserve Bank of India Act, 1934 on 1 April 1935 and nationalised on 1 January 1949. The Bank acts as banker to the Central Government, state governments, commercial banks, state co-operative banks and some of the financial institutions. It formulates and administers monetary policy with a view to ensuring stability in prices while promoting higher production in the real sector through proper deployment of credit. RBI plays an important role in maintaining the stability of exchange value of the rupee and acts as an agent of the Government in respect of India’s membership of International Monetary Fund. The Reserve Bank also performs a variety of developmental and promotional functions. These apart, the Reserve Bank also handles the borrowing programme of the Government of India.

The Reserve Bank is the sole authority for issue of currency in India other than one rupee coins and subsidiary coins and notes. As the agent of the Central Government, the Reserve Bank undertakes distribution of one-rupees notes and coins, as well as small coins issued by the Government.

 Composition of Banking System- Commercial Banking system in India consisted of 218 scheduled commercial books (including foreign banks) as on 31 March 2006. Of the scheduled commercial banks, 116 are in public sector of  which 133 are regional rural banks (RRBs) and these account for about 75.2 percent of the deposits of all scheduled commercial banks. The regional rural banks were specially set up to increase the flow of credit to small borrowers in the rural areas. The remaining 28 banks in the public sector (i.e.), 19 nationalized banks, 8 Banks in SBI group and IDBI Ltd. are commercial banks and transact all types of commercial banking business.

Amongst the public sector banks, as on 31 March 2006, the nationalized banks (including IDBI Ltd.) group is the biggest unit with 33,868 offices, deposits aggregating Rs. 10,13,664 crore and advances of Rs. 7,21,066 crore. The State Bank of India group (SBI and its seven associates) with 13,820 offices, deposits aggregating Rs. 4,90,375 crore and advances Rs. 3,50,961 crore is the second largest unit.

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