Establishment

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the
Reserve Bank of India Act, 1934 .
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved
to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the
Government of India.
Preamble
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:
"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of the country to its
advantage."

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Central Board
The Reserve Bank''s affairs are governed by a central board of directors. The board is appointed by the
Government of India in keeping with the Reserve Bank of India Act.
 Appointed/nominated for a period of four years
 Constitution:
o Official Directors
 Full-time : Governor and not more than four Deputy Governors
o Non-Official Directors
 Nominated by Government: ten Directors from various fields and one government
Official
 Others: four Directors - one each from four local boards
Functions : General superintendence and direction of the Bank''s affairs

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Local Boards
 One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi
 Membership:
 consist of five members each
 appointed by the Central Government
 for a term of four years
Functions : To advise the Central Board on local matters and to represent territorial and economic
interests of local cooperative and indigenous banks; to perform such other functions as delegated by
Central Board from time to time.
Financial Supervision
The Reserve Bank of India performs this function under the guidance of the Board for Financial
Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of
Directors of the Reserve Bank of India.
Objective
Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising
commercial banks, financial institutions and non-banking finance companies.
Constitution
The Board is constituted by co-opting four Directors from the Central Board as members for a term of
two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank are ex-officio
members. One Deputy Governor, usually, the Deputy Governor in charge of banking regulation and
supervision, is nominated as the Vice-Chairman of the Board.
BFS meetings
The Board is required to meet normally once every month. It considers inspection reports and other
supervisory issues placed before it by the supervisory departments.
BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit and
internal audit functions in banks and financial institutions. The audit sub-committee includes Deputy
Governor as the chairman and two Directors of the Central Board as members.
The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-
Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the
regulatory and supervisory issues.
Functions
Some of the initiatives taken by BFS include:
i. restructuring of the system of bank inspections
ii. introduction of off-site surveillance,
iii. strengthening of the role of statutory auditors and
iv. strengthening of the internal defences of supervised institutions.
The Audit Sub-committee of BFS has reviewed the current system of concurrent audit, norms of
empanelment and appointment of statutory auditors, the quality and coverage of statutory audit reports,
and the important issue of greater transparency and disclosure in the published accounts of supervised
institutions.
Current Focus
 supervision of financial institutions
 consolidated accounting
 legal issues in bank frauds
 divergence in assessments of non-performing assets and
 supervisory rating model for banks.

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Regulation and Supervision of Payment systems

The Payment and Settlement Systems Act 2007(PSS Act 2007) empowers the Reserve Bank of India to
regulate and supervise the payment systems in the country. The Act states that these powers will be
exercised by the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)
constituted by it for the purpose. The BPSS will be a Committee of the Reserve Bank of India's Central
Board.
Objective and Functions
The functions of the BPSS will be to lay down policies for regulation and supervision of the payment
systems in the country, laying down standards for existing and future payment systems, authorisation of
payment systems, determination of the criteria for membership of payment systems including
continuation, termination and rejection of membership, overseeing the administration of regulations and
guidelines framed under the PSS Act 2007, issuing directions to payment system operators, calling for
returns/information, etc.
Constitution
The BPSS consists of the Governor of the RBI as Chairperson, Deputy Governors as Members out of
whom the Deputy Governor who is in charge of the Department of Payment and Settlement Systems will
be the Vice Chairperson and three Directors of Reserve Bank of India Central Board will be members.
Two Executive Directors of Reserve Bank of India and its principal Legal Adviser will be permanent
invitees to the meetings. Persons with experience in the field of payment and settlement systems may be
invited to the meetings of the BPSS either as permanent or ad-hoc invitees.
BPSS is assisted by the Department of Payment and Settlement Systems.
Current Focus
1. Authorisation/ refusal of authorisation of/to payment systems.
2. To lay down policies for encouraging the movement from paper-based payment systems to
electronic modes of payments.
3. Setting up of the regulatory framework of newer payment methods.
4. Enhancement of customer convenience in payment systems.
5. Improving security and efficiency in paper-based and electronic modes of payment.

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Legal Framework
Umbrella Acts
 Reserve Bank of India Act, 1934: g o v e r n s t h e R e s e r v e B a n k f u n c t i o n s
 Banking Regulation Act, 1949: governs the financial sector
Acts governing specific functions
 Public Debt Act, 1944/Government Securities Act (Proposed): Governs government debt market
 Securities Contract (Regulation) Act, 1956: Regulates government securities market
 Indian Coinage Act, 1906:Governs currency and coins
 Foreign Exchange Regulation Act, 1973/Foreign Exchange Management Act, 1999: Governs trade
and foreign exchange market
 Payment and Settlement Systems Act 2007: Regulation and supervision of the payment systems.
Acts governing Banking Operations
 Companies Act, 1956:Governs banks as companies
 Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980: Relates to
nationalisation of banks
 Bankers'' Books Evidence Act
 Banking Secrecy Act
 Negotiable Instruments Act, 1881
Acts governing Individual Institutions
 State Bank of India Act, 1954
 The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
 The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
  National Bank for Agriculture and Rural Development Act
 National Housing Bank Act
 Deposit Insurance and Credit Guarantee Corporation Act

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Main Functions
Monetary Authority:
 Formulates, implements and monitors the monetary policy.
 Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
Regulator and supervisor of the financial system:
 Prescribes broad parameters of banking operations within which the country''s banking and
financial system functions.
 Objective: maintain public confidence in the system, protect depositors'' interest and provide
cost-effective banking services to the public.
 Regulator and supervisor of the payment systems
o Authorises setting up of payment systems
o Lays down standards for operation of the payment system
o Issues direction, calls for returns/information from payment system operators.
Manager of Foreign Exchange
 Manages the Foreign Exchange Management Act, 1999.
 Objective: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.
Issuer of currency:
 Issues and exchanges or destroys currency and coins not fit for circulation.
 Objective: to give the public adequate quantity of supplies of currency notes and coins and in
good quality.
Developmental role
 Performs a wide range of promotional functions to support national objectives.
Related Functions
 Banker to the Government: performs merchant banking function for the central and the state
governments; also acts as their banker.
 Banker to banks: maintains banking accounts of all scheduled banks.

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Offices
 Has 4 regional offices ,15 branches and 5 sub-offices.
Training Establishments
Has six training establishments
 Three, namely, College of Agricultural Banking, Bankers Training College and Reserve Bank of
India Staff College are part of the Reserve Bank
 Others are autonomous, such as, National Institute for Bank Management, Indira Gandhi Institute
for Development Research (IGIDR), Institute for Development and Research in Banking
Technology (IDRBT)
For details on training establishments, please check their websites links which are available in Other
Links.
Subsidiaries
Fully owned: National Housing Bank(NHB), Deposit Insurance and Credit Guarantee Corporation of
India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL)
Majority stake: National Bank for Agriculture and Rural Development(NABARD).