What This Chapter Covers

Every country has one special bank that stands at the very top of its banking system — a bank that does not deal with the general public at all, but instead controls, guides, and supervises all the other banks and manages the nation's money and credit. This is the central bank. In India, that role is played by the Reserve Bank of India (RBI), established under the Reserve Bank of India Act, 1934, and operating from 1 April 1935.

This chapter — part of the Banking and Insurance elective in the Odisha CHSE +2 First-Year Commerce course — explains what a central bank is, the functions the RBI performs for the government, for other banks, and for the economy as a whole, and the tools it uses to control the flow of credit in the country. It then looks at how banking itself has modernised through innovative banking services, and closes with the growing idea that banks owe a social responsibility to the community they serve, not just a duty to their shareholders.

The monetary and banking ideas taught here are the standard principles of banking and monetary economics followed across India; this is a state-specific elective built on those same well-established principles, not a reproduction of any particular publisher's textbook.

The chapter is organised as follows: the meaning of a central bank (Section a), the functions of the RBI (Section b), the meaning and objectives of credit control (Section c), the quantitative methods of credit control (Section d), the selective or qualitative methods (Section e), innovative banking services (Section f), and the social responsibilities of banks (Section g).