The Reserve Bank of India, in short called RBI is the country’s principal banking body. It does various crucial financial transactions as well as carries out diverse persuasive and progressive actions to encounter the vibrant necessities of the nation.
Let’s have a look at some of the prime functions of the Reserve Bank of India.
ü It controls the issue of currency in the country;
ü It holds onto the overseas exchange funds;
ü Reserve Bank of India acts as a financier to the government;
ü It also acts as a supervisor of credit
Now let’s go through each of these functions one by one.
Under Section 22 of the Reserve Bank of India Act, it is solely responsible to issue bank notes of all values apart from one rupee coin and note, which are issued by Ministry of finance. However, it’s responsible for the spreading of one rupee notes and coins and other small coins across the country. The Reserve Bank of India has a distinct “Issue Division” which is in authority of issuing the currency notes. Apart from issuing currency the bank also puts an end to the notes and coins that are not fit for exchange.
The Reserve Bank of India is the guardian of country’s overseas exchange funds. It sustains and stabilizes the external worth of the Indian rupee, and manages the overseas exchange funds. The Reserve Bank sells and purchases overseas exchanges. It also fixes the selling and purchasing amounts of overseas exchanges. All payments from India to overseas countries and from overseas to India are done via the Reserve Bank only.
It upholds and runs government credits, brings together and makes payments on behalf of the government. It makes offers backing the government to carry out five year plans. It also commences overseas exchange funds on behalf of the Union Government. It actually performs as an agent of the government while dealing with the World Bank, the International Monetary Fund and other global commercial bodies. It counsels the government on monetary related matters like credit tasks, savings, agronomic and manufacturing business, funding, development, trade and industry progress, etc.
The Reserve Bank of India carries out the duty of supervisor of credit so that in-house value constancy is maintained and financial growth is encouraged. By doing so the Reserve Bank tries to elude inflationary and deflationary inclinations in the state. The Reserve Bank controls the cash supply according to the varying necessities of the Indian economy. The Reserve Bank uses several measurable and qualitative methods to supervise and control credit in India.