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What are the functions of RBI?
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Answer Posted / eswar narkedamilli
What is The Reserve Bank of India?
The Reserve Bank of India[RBI] is the apex institution of
the Indian Finanacial System.It is the central bank of the
country and is fully owned by the Government of India.
What are the functions of the RBI?
The functions of the Reserve Bank of India are:
1.The primary function of the RBI is to issue a stable legal
tender of money, both in volume and composition, to the
varying needs of the economy.It has the sole right of
issuing both currencies and bank notes.
2.Secondly, the RBI handles the cash reserves of other banks
in the country. It acts as a "Bank of Banks" .It makes the
transactions or transfers of money and payments occuring
between the banks much more easier.
3.The RBI holds the power to stabilise the situation of an
economy or to satisfy its expansion needs by pumping in
additional money or currency in the market.It also regulates
the interest rates on loans, which it provides to other
commercial banks in the country, that allows it to restrict
the flow of money or to relax the flow of currency as per
the needs and requirements of the circumstances.Such actions
were recently seen during the "GLOBAL FINANCIAL TURMOIL" ,
where the RBI pumped in loads of money into the markets and
also announced a significant cut in the rates of interst
imposed on loans.
4. It is also the bank of the Government. It provides
ordinary banking services to both the Central Government and
the State Governments. It also acts as an underwriter to them.
5.It acts as a safe-keeper of the foreign-exchange reserves
of the country.This makes the co-ordination and management
of the money matters of the nation easier to handle. It is
crucial in calculating the strength of the currency when
compared currencies of other nations.
6.The RBI also manages the exchange rates and helps in its
regulation and stabilisation.Being the custodian of foreign
exchange reserves facilitates this task of the Central Bank
of the country.A stable rate of exxchange is very
resourceful in promoting international trade and orderly
capital flows.
7.It also has additional functions related to supervising
and auditing of other banks. Banks which intend to practice
in the country for various commercial activities must obtain
their license from the Resrve Bank of India.
The Reserve Bank has also proved to be immenseley helpful in
the promotion of markets for Government securities.
| Is This Answer Correct ? | 62 Yes | 12 No |
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