Reserve Bank of India Act 1934

The Reserve Bank of India (RBI) was established on 1st April, 1935 in accordance with the provision of the Reserve Bank of India Act, 1934.

The Bank was originally constituted as a shareholders institution on the model of leading foreign Central Banks of the time. The Bank’s share capital was Rs.5 Crores divided into 5 lakh fully paid-up shares of Rs.100 each. The entire share capital was, in the beginning, owned by private shareholders with the exception of 2200 shares, which were allotted to the Central Government. It was in February 1947 that the decision to nationalize the Bank was taken and in terms of the Reserve Bank of India. (Transfer to Public Ownership Act 1948) the entire share capital was deemed to be transferred to the Central Government. As from 1st January 1949 RBI entered into its career, as 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.

Main Functions of the Bank:

The main functions of RBI are broadly the same as those of other Central Banks all over the world. These are:

  1. Issue of paper currency.
  2. Acting as banker to the government.
  3. Control over bank credit.
  4. Acting as the lender of last resort to commercial banks.
  5. Maintenance of external value of the rupee.
  6. To promote the growth of the economy within the framework of the general economic policy of the Government.

The other functions of secondary nature are: -

  1. Provision of rural credit.
  2. Collection and Publication of monetary and financial information.

Organization of Bank:

The general superintendence and direction of the Bank’s affairs is vested in the Central Board of Directors, which comprises of

  1. A Governor and not more than four Deputy Governors appointed by the Central Govt.
  2. Four Directors nominated by the Central Govt. one from each of the four local Boards.
  3. Ten Directors by the Central Government.
  4. One Govt. official nominated by the Central Govt.

The Governor and Deputy Governors hold office for such periods not exceeding five years. They are eligible for re-appointment. The Directors hold office for four years. The Board has delegated some of its functions by means of statutory regulation to the Committee called Committee of Central Board, constituting of Governor, Deputy Governors and Directors representing area in which the meeting is held. The Committee meets once a week.

For each of the regional areas of the country specified in the First Schedule to the Act, there is a Local Board with headquarters at Mumbai, Calcutta, Chennai and New Delhi. Local Boards consist of five members, each appointed by the Central Government. They are appointed for a period of four years. The functions of the Local Boards are to advise the Central Board on such matters as may be generally or specifically referred to them.

Internal Organization and Management:

The Chairman of the Central Board of Directors of the Bank and its Chief Executive authority is the Governor. The Governor has the powers of general superintendence and direction of the affairs and business of the Bank and may exercise all powers, which may be exercised by the Bank. The Governor is assisted, at present, in the performance of his duties by three Deputy Governors and three Executive Directors.

Departments in the Bank:

  1. Department of Administration and Personnel Management.
  2. Department of Banking Operations.
  3. Department of Currency Management.
  4. Department of Economic Analysis and Policy.
  5. Department of Expenditure and Budgetary Control.
  6. Department of External Investment and Operations.
  7. Department of Financial Companies.
  8. Department of Government and Bank Accounts.
  9. Department of Information Technology
  10. Department of Statistical Analysis and Computer Sciences.
  11. Department of Supervision.
  12. Exchange Control Department.
  13. Financial Institutions Cell.
  14. Human Resource Development Department
  15. Industrial and Export Credit Department
  16. Inspection Department
  17. Internal Debt Management Cell.
  18. Legal Department.
  19. Premises Department
  20. Rural Planning and Credit Department
  21. Secretary’s Department
  22. Urban Bank’s Department.


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