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Introduction

The Reserve Bank of India (RBI), established on April 1, 1935 under the RBI Act, 1934 and nationalized in 1949, serves as India's central bank and financial regulator. Its broad mandate includes issuing currency, formulating monetary policy, regulating the financial system, and fostering economic development.

1. Monetary Authority

• Formulation & implementation of monetary policy: Targets include maintaining 4% inflation (±2%) at least until March 2026, using tools like repo rate, reverse repo, CRR, and SLR.
• Open Market Operations (OMO): Buying or selling government securities to manage liquidity.

2. Currency Issuer

• Sole authority to issue banknotes, except ₹1 notes issued by the Ministry of Finance.
• Ensures high-quality, sufficient currency circulation and replaces worn-out notes.

3. Banker to Government

• Acts as banker, agent, and advisor to both central & state governments.
• Manages government transactions, public debt, and finance operations including Ways and Means Advances (WMAs).

4. Bankers’ Bank & Lender of Last Resort

• Maintains accounts of scheduled banks; ensures CRR and SLR compliance.
• Offers short-term liquidity support and acts as the lender of last resort during systemic stress.

5. Credit Controller

• Controls credit quantitatively (bank rate, repo, CRR/SLR, OMO) and qualitatively (selective credit controls, moral suasion, margin requirements).

6. Regulator & Supervisor

• Issues licenses, supervises banks and NBFCs, mandates prudential norms like capital adequacy, and periodic inspections (on-site/off-site).
• Implements the Banking Ombudsman Scheme to redress customer grievances.

7. Custodian of Foreign Exchange Reserves

• Administers Foreign Exchange Management Act (FEMA), 1999.
• Manages forex & gold reserves; intervenes in forex markets to stabilize the rupee.

8. Developmental & Promotional Role

• Supports financial inclusion via digital payments (UPI, Bharat QR, FASTag), fosters banking in rural areas, promotes institutional credit for agriculture and industry.
• Promotes specialized institutions (e.g. NABARD, SIDBI), and loan recovery mechanisms.

9. Research, Data & Global Representation

• Publishes statistical reports, conducts economic research via units like the National Institute of Bank Management (NIBM), a think tank chaired by the RBI Governor.
• Represents India in global forums like the IMF, G20, and joined Project Nexus for retail cross-border payment.

Summary Table

Importance for UGC‑NET Aspirants

• Many UGC‑NET Commerce/Banking papers include questions on RBI’s structure, monetary tools (repo/CRR/SLR), regulatory functions, and developmental initiatives.
• Knowledge of FEMA, lender‑of‑last‑resort, and payment systems regulation is critical for both Paper I and II.

Conclusion

The Reserve Bank of India is not merely a regulator; it is a central pillar of India’s financial architecture — balancing monetary stability, regulatory oversight, developmental finance, and technological innovation. A solid grasp of its functions and evolving role can provide UGC‑NET aspirants with a robust foundation for answering both conceptual and current‑affairs questions.

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