RBI and Monetary Policy
RBI (Reserve Bank of India)
- RBI was established in April 1935 under Reserve Bank of India, 1934.
- On the recommendation of Hilton-Young Commission.
- Central Bank of India which was nationalized in 1949.
- Central office initial was established in Calcutta and later moved to Mumbai in 1937.
- Official Directors- Governors and not more than four deputy governors.
- RBI performs his function under the guidance of the Board of financial supervision.
Board for Financial Supervision (BFS)
Constituted in November 1994. The Board is constituted by co-opting four Directors from the Central Board and is chaired by the Governor.
- Important Acts Administered by RBI
(i) Reserve Bank of India Act, 1934
(ii) Public Debt Act, 1944/Government Securities Act, 2006
(iii) Government Securities Regulations, 2007
(iv) Banking Regulation Act, 1949
(v) Foreign Exchange Management Act, 1999
(vi) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
Other Relevant Acts
(i) Negotiable Instruments Act, 1881
(ii) Companies Act, 1956/ Companies Act, 2013
(iii) Deposit Insurance and Credit Guarantee Corporation Act, 1961
(iv) Regional Rural Banks Act, 1976
(v) National Bank for Agriculture and Rural Development Act, 1981
(vi) National Housing Bank Act, 1987
(vii) Competition Act, 2002
(viii) Indian Coinage Act, 2011
- Following are the fully owned subsidiary of RBI-
(i) Deposit Insurance and Credit Guarantee Corporation of India (DICGC)
(ii) Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
(iii) National Housing Bank (NHB)
- The first governor of RBI- Sir Osborne Smith
The first governor of RBI after nationalization- C. D. Deshmukh
First women Deputy Governor of RBI -K.J.Udeshi.
- RBI Emblem: Tiger and Palm tree
What is Monetary Policy?
- The policy made by the central bank (Reserve Bank of India) to control the money supply in the economy.
MPC (Monetary Policy Committee)
- The Monetary Policy Committee of India is a committee of the Reserve Bank of India that is responsible for fixing the benchmark interest rate in India.
- Section 45ZB of the amended RBI Act, 1934 provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government to determine the interest rate that is required to achieve the inflation target.
- The MPC is required to meet at least four times in a year.
- Six-membered MPC is headed by RBI governor.
- The Members of the Monetary Policy Committee appointed by the Central Government shall hold office for a period of four years.