The Reserve Bank of India (RBI)is the apex of banking system in India. The RBI was setup in 1935 under the rbi act 1934, when setup it was entirely owned by private shared holders. It was nationalised on 1 January, 1949.
Functions of RBI
Sole Authority to Issue Currency ( Except Rupee 1 note & coin ) :
The Rbi issues the currency on the basis of minimum reserve system under which it keeps a banking of mere rupees 200 crore worth of gold and foreign securities ( Rupee 115 crore of gold and Rupee 85 crore worth of foreign securities). Against this minimal value it can issue unlimted amount of currency.
Bankes Bank
All the commercial banks as well as state cooperative banks keeps a stipulated rserve in cash and approved securities with RBI.
Sole Authority to Keep Forex Rsecrve of the Country
Forex reserve consists of
(b)Gold
(c)Special Drawing Right
Controller of Credit
RBI controls the credit creation capacity of banks by adopting two sets of credit control measures
Quantitative Measures
(a) Bank Rate
(b) Cash Reserve Ratio (CRR)
(c) Open Market Operation
(d) Statutory Liquidity Ratio ( SLR )
Qualtitative Measures
(a) Rationing of Credit
