Rbi is the central banking institution of India established in the year 1935. It is located in Mumbai, Maharashtra. Current governor of Rbi is Shaktikanta Das.
Functions of Rbi are like-
It controls and supervises the functioning of financial institutions, commercial banks and non-banking financial companies by establishing certain set rules & regulations to be followed
It is authorized to facilitate the issuance and flow of currency in the country by analyzing economic structure and prevailing scenario to decide on the number of paper notes to be printed & circulated in the system
While RBI prints the paper currency, coins are minted by the govt. of India and RBI acts as an agent for handling and distributing coins
RBI also keeps on upgrading the security features in currency to avoid any kind of counterfeiting of currency
It serves as a banker to the government by carrying out country’s financial transactions efficiently by maintaining accounts of payments and receipts
It works as a banker’s bank in a way that commercial banks hold their account in Rbi, deposits money and borrows money as and when required on the prevailing interest rate
It regulated foreign exchange transactions by facilitating foreign trade and maintaining foreign exchange market in India to create forex reserve
Until 2016 monetary policy was solely under control of Rbi, but as in 2016 Monetary policy committee had been formed to decide and fix the interest rate in India
Repo Rate
Repo Rate – It is the rate charged by Rbi while lending money to commercial banks for a shorter time period of less than 90 days. If Rbi wants to make borrowing money expensive for commercial bank it increases the repo rate and in similar way it decreases repo rate to make borrowings cheaper for commercial bank. Current Repo Rate is 6.50%
Reverse Repo Rate
Reverse repo rate is the interest rate charged by commercial banks on Rbi for borrowing money. This borrowing is usually for a shorter period of time. Current Reverse Repo Rate is 6.25%
Bank Rate
It is the interest rate charged by Rbi on long-term borrowings by commercial banks. Current Bank Rate is 6.75%
Cash Reserve Ratio – It is mandated to keep certain percentage of deposit as a cash reserve in Rbi, this obligatory deposit by commercial banks in Rbi is known as Cash Reserve Ratio. Current CRR is 4%
Statutory Liquidity Ratio – It is proportion of net demand and time liabilities mandated to be maintained as liquid reserve usually in the form of cash and gold reserve by commercial banks in Rbi. Current SLR is 19.5%
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