The Reserve Bank of India and Its Functions

The Reserve Bank of India (RBI), established in 1935, is India's central bank and the apex institution of the country's monetary and banking system. Its main functions are:

• Issue of currency. The RBI has the sole right to issue currency notes (except the one-rupee note and coins, issued by the Government). This ensures a uniform, well-regulated currency.
• Banker to the government. It keeps the accounts of the central and state governments, receives and makes payments on their behalf, manages public debt, and advises the government on monetary and financial matters.
• Banker's bank and lender of last resort. All scheduled banks keep a part of their reserves (the CRR) with the RBI; the RBI provides them funds in times of need, acting as the lender of last resort.
• Controller of credit. The RBI regulates the volume and cost of credit in the economy through its monetary-policy instruments (Section 5) — its most important function from a macroeconomic viewpoint.
• Custodian of foreign-exchange reserves. It holds and manages the country's foreign-exchange reserves and helps maintain the external value of the rupee.
• Developmental and promotional functions. It has promoted institutions for agricultural and industrial finance and works to extend banking to rural and unbanked areas. …