Banking & Finance

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 :

Monetary Authority

  • Formulates, implements, and monitors the monetary policy.
  • 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, 1999.
  • Objective: Facilitating external trade and payment and promoting the orderly development and maintenance of the foreign exchange market in India.

Issuer of Currency

  • Issues and exchanges/destroy currency and coins that are not fit for circulation.

Other Functions

  • Banker and debt manager to the government: Performs a merchant banking function for the Central and State Governments and acts as their banker
  • 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 2020
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Rajiv Rajendran
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