Reserve Bank of India- History, Headquarter, Nationalization, Functions, and Board of Directors

Logo of Reserve Bank of India


RBI is the central bank of India which regulates the Indian Banking System and monetary policy of India and it also controls the issuance of all types of currency. RBI is a statutory body.


The Reserve Bank Of India was established on April 1, 1935, under The RBI Act 1934 on the recommendation of the Hilton-Young Commission. In 1926, Royal Commission on Indian currency and finance had recommended to set up the Central Bank Of India (Reserve Bank Of India) but this recommendation was not considered that time and Again in 1933-1934 Hilton-Young Commission changed name of Royal Commission had recommended the creation of a Central Bank of India and presented the bill and this time the bill was passed and became the RBI ACT 1934.


The Headquater of Reserve Bank Of India is situated at Mumbai. Initially, the headquarter of RBI was situated at Calcutta but in 1937 it was permanently shifted to Mumbai.


When RBI was established it was not owned by the Government of India rather it was privately owned. but 1st January 1949 RBI was nationalized under Reserve Bank Of India (Transfer to Public Ownership) Act, 1948 and then it came under the Government of India.


Issuance of Currency

Reserve Bank of India has the sole authority to issue Currency Notes and it is one of the main functions of RBI. Reserve bank issues all types of currency notes above one rupee notes because one rupee notes are issued by the Ministry of Finance(GOI). RBI uses the Minimum Reserve System to issue currency notes. Minimum Reserve System(MRS) was adopted in 1957 by the Central bank of India. For issuing banknotes Reserve Bank should have a minimum reserve of 200 crore in which 115 crore in the form of Gold and 85 crore in the form of Foreign Exchange. Reserve Bank of India can issue a maximum of 10,000 denominations of banknotes under the RBI Act 1934.

Manager Of Foreign Exchange Reserve

 In India, Monetary Policy is controlled by the Reserve Bank of India. RBI Act 1934 empowers all necessary power to Reserve Bank to control it. Keeping in mind the objective of Growth, RBI takes every possible step to control the flow of money into market by using monetary policy instruments such as Repo Rate, Reserve Repo Rate, Bank Rate, Marginal standing facility, Cash Reserve Ratio(CRR) , Statutory Liquidity Ratio(SLR) etc so that it can control inflation and maintain the price stability in the market.

Banker to all Banks

Banks have to maintain a certain rate of interest (Cash Reserve Ratio) of their Net Demand and Time Liabilities(NDTL) with Reserve Bank. for maintaining CRR, Banks have to keep accounts with RBI. Whenever they require funds, Reserve Bank provides them funds as a form of loan. RBI also plays a vital role in enabling inter-bank settlement facilities smooth and efficient so that banks as well as customers do not have to face difficulties.

Banker to the Government

Reserve Bank works as the banker to the Central Government as well as State Governments. Governments maintain Current Account deposits with RBI to keep their cash balances. The Central Bank of India takes care of all business activities of the Government. It also makes and receives payments on behalf of the Government such as payment of salaries to government employees, payment of pension to the retired Government employees and payment of interest on public debt even when Governments either Central Government or State Governments have a lack of funds then RBI provides them credit facility.

Lander to the last Resort

Reserve Bank is considered as the lander to the last resort because it gives funds/liquidities as a form of loan to those banks or financial institutions that are facing financial difficulties or about to shout down so that these banks or institutions can come out from adverse conditions and run their banking operation smoothly and effectively. 

Regulation and Supervision of the Indian Banking System

Banking Regulation Act 1949 empowers Reserve bank the power to regulate and supervise the Banking System in India, grant licenses to banks and issue banking-related guidelines so that banks can run their operations effectively. If any institution either Indian or Foreign-based institution wants to start banking operation in India. First, it must have to take a license from the Reserve Bank of India.

Central board of directors of Reserve bank

There are 21- members in the Central Board of Directors Of RBI.

Governor of the Reserve Bank Of India is the Chairman of the board.

Governor of RBI- 1

Deputy Governors of RBI- 4

Ten Government-Nominated Members- 10

Finance Ministry-2

Local Boards Representative- 4

( Mumbai, Kolkata,Chennai, New Delhi).

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