Reserve Bank of India (RBI)
Reserve Bank of India (RBI) is the apex institution of Indian monetary system and financial system. Being the central bank of the country, RBI is the institution that control and stabilize the monetary and banking system.
Evolution of RBI
Reserve Bank of India was established on April 1, 1935 under the provisions of Reserve Bank of India Act, 1934 with its central office in Calcutta (Kolkata). It was moved to Bombay (Mumbai) in 1937.It was originally constituted as a shareholders bank with a capital of Rupees 5 crore. It was a private shareholders company and the contribution from central government was a nominal Rupees 2.2 lakh.
After independence, it was decided to nationalize the bank and the decision was taken in 1947. Consequently, Reserve bank of India (transfer to Public Ownership) Act was passed in 1948 and from January 1, 1949, RBI began to function as a government owned institution.
Governor and the Board of Directors of RBI
Management of the RBI vests with the Central Board of Directors comprising 20 members. The composition of the RBI board is as shown below:
a. One Governor and four Deputy Governors appointed by the central government
b. Four directors with one each from four local boards nominated by the central government
c. Ten Directors nominated by the central government
d. One government official nominated by the central government
The term of Governor and Deputy Governors are five years. They are eligible for re-appointment. The Reserve Bank Governor is the Chief executive of the bank and the Chairman of the Board of Directors. The Board must meet at least once ina quarter subject to a minimum of six times in a year.
RBI has four Local Boards namely Western, Eastern, Northern and Southern. Local Boards consists of five members appointed by the central government for a term of four years each with eligibility for reappointment. The headquarters of Local Boards are in Mumbai, Kolkata, Chennai and New Delhi. Local Board advices Central Board on matters referred to them and discharges the duties delegated to them by the Central Board.
The selection of Reserve Bank of India Governor is a process involving Financial Sector Regulatory Appointments Search Committee FSRASC), Appointment Committee of the Cabinet (ACB) and then by the Prime Minister. RBVI Governor is appointed and not elected and the power to appoint is vested with the central Government under Section 8 of the RBI Act. The government can also remove the Governor any time from the office. Hence the RBI Governor position is at the pleasure of the central government.
The management of functions of RBI rests with the Governor and his team of executives and no role is envisaged for the Central Government as RBI is set up as an autonomous institution by the Act of parliament. However, by virtue of Section 7 of RBI Act, 1934, the Central Government is authorized to give directions to RBI.
Subsidiaries of RBI
As part of effectively discharging the duties and responsibilities entrusted with RBI, RBI has formed three fully owned subsidiaries. They are
a. Deposit and Credit Guarantee Corporation of India (DICGC)
b. National Housing Bank (NHB)
c. Bharatiya Reserve Bank Note Mudran Private Limited ( BRBNMPL)
Click to read the Roles and responsibilities of RBI
