Reserve Bank of India (RBI): Important Notes and Questions

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The Reserve Bank of India (RBI) is India’s central bank and regulatory authority, responsible for overseeing and regulating the Indian banking system. Owned by the Ministry of Finance, Government of India, the RBI manages the issuance, control, and supply of the Indian rupee. Additionally, it oversees the country’s primary payment systems and works to promote economic development.

Key Functions and Divisions

  • Bharatiya Reserve Bank Note Mudran (BRBNM): A specialized division of the RBI responsible for printing and minting Indian currency notes (INR). BRBNM operates two currency printing presses located in Mysore (Karnataka, Southern India) and Salboni (West Bengal, Eastern India).
  • National Payments Corporation of India (NPCI): Established by the RBI in collaboration with the Indian Banks’ Association, NPCI promotes and regulates payment and settlement systems in India.
  • Deposit Insurance and Credit Guarantee Corporation (DICGC): This division provides insurance for deposits and guarantees credit facilities for all Indian banks, ensuring the safety of depositors’ funds and enhancing the stability of the banking system.

Historical Background

  • Establishment: The RBI commenced operations on 1 April 1935 under the Reserve Bank of India Act, 1934. Initially, the share capital was divided into shares of ₹100 each, fully paid.
  • Nationalization: The RBI was nationalized on 1 January 1949, about a year and a half after India gained independence.
  • Monetary Policy: Until the establishment of the Monetary Policy Committee in 2016, the RBI had full control over the country’s monetary policy.

Governance

The RBI is governed by a 21-member central board of directors, consisting of:

  • The governor
  • Four deputy governors
  • Two representatives from the Ministry of Finance (usually the Economic Affairs Secretary and the Financial Services Secretary)
  • Ten government-nominated directors
  • Four directors representing local boards in Mumbai, Kolkata, Chennai, and Delhi

Each local board includes five members who represent regional interests and those of cooperative and indigenous banks.

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Membership and Initiatives

  • Asian Clearing Union: The RBI is a member bank of this regional payment system.
  • Financial Inclusion: The RBI actively promotes financial inclusion policies and is a leading member of the Alliance for Financial Inclusion (AFI).

Additional Information

  • Nickname: The RBI is often referred to as ‘Mint Street’.

Multiple Choice Questions (MCQs)

Q) What is the primary role of the Reserve Bank of India (RBI)?

    • a) Regulating the stock market
    • b) Managing the Indian banking system
    • c) Controlling foreign trade
    • d) Supervising non-banking financial companies
    • Answer: b) Managing the Indian banking system

    Q) Which division of the RBI is responsible for printing and minting Indian currency notes?

      • a) National Payments Corporation of India
      • b) Deposit Insurance and Credit Guarantee Corporation
      • c) Bharatiya Reserve Bank Note Mudran
      • d) Reserve Bank of India Innovation Hub
      • Answer: c) Bharatiya Reserve Bank Note Mudran

      Q) When was the RBI nationalized?

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        • a) 1 April 1935
        • b) 15 August 1947
        • c) 1 January 1949
        • d) 26 January 1950
        • Answer: c) 1 January 1949

        Q) How many members are there on the RBI’s central board of directors?

          • a) 15
          • b) 18
          • c) 21
          • d) 25
          • Answer: c) 21

          Q) Which organization was established by the RBI to promote and regulate payment and settlement systems in India?

            • a) Indian Banks’ Association
            • b) National Payments Corporation of India
            • c) Institute for Development and Research in Banking Technology
            • d) Reserve Bank Information Technology
            • Answer: b) National Payments Corporation of India
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