The Banking System
The banking and financial sector in India functions
under the superintendence and control of the
central bank, the Reserve Bank of India (RBI). It was
established in 1935 with the main aim of maintaining
monetary and financial stability
The RBI performs the following functions1
- Formulates, implements, and monitors the
- Objective: Maintaining price stability and ensuring
the adequate flow of credit to productive sectors.
Regulator and Supervisor of the Financial System
- Prescribes a broad operational framework for the
country’s banking and financial system.
- Objective: Maintaining public confidence in the
system, protecting depositors’ interests, and
providing cost-effective banking services.
Manager of Foreign Exchange
- Manages the Foreign Exchange Management Act,
- Objective: Facilitating external trade and payment
and promoting the orderly development and
maintenance of the foreign exchange market in
Issuer of Currency
- Issues and exchanges/destroy currency and coins
that are not fit for circulation.
- Banker and debt manager to the government:
Performs a merchant banking function for the
Central and State Governments and acts as their
- Banker to banks: Maintains banking accounts of
all scheduled banks.
- 1.About Us, RBI, https://www.rbi.org.in/Scripts/AboutusDisplay.aspx#MF, accessed 15 September 2020