RBI Act 1934 Functions Quiz

Currency Issuance and Banking Regulation

• Only the Reserve Bank of India (RBI) is authorized to issue currency notes in India.
• Banks must maintain a daily balance of 4% of their net demand and time liabilities with the RBI according to the Banking Regulation Act, 1949.
• The current Cash Reserve Ratio (CRR) set by the RBI is 4.5%.
• Banks must maintain a maximum of 25% of their net demand and time liabilities as security with the RBI per the Banking Regulation Act, 1949.

Reserve Bank of India Functions and Establishment

• The RBI provides refinance facilities to all scheduled banks and serves as the lender of last resort.
• The RBI was established with a paid-up capital of ₹20 crores under the Currency Act, 1948.
• The RBI was founded based on the recommendations of the Hilton-Young Commission, which endorsed a central bank for India.

Nationalization and Governance

• The Indian Central Government nationalized the Reserve Bank of India in January 1949.
• The RBI has four Deputy Governors who assist in its governance and operational functions.

Historical Context and Legislative Framework

• The first Governor of the RBI was James B. Taylor, serving from 1935 to 1937.
• Section 24 of the Indian Banking Act mandates that every bank must maintain 25% of its total deposits in cash and approved securities.
• The primary goal of the RBI's credit regulation measures is to ensure monetary stability and control inflation.
• Extensive inspection rights for banks are exercised by the RBI under Section 35 of the Indian Banking Act.
• The primary role of the RBI concerning foreign exchange reserves is to manage and safeguard the country’s foreign exchange and maintain external stability.

Test your knowledge about the functions of the Reserve Bank of India as per the RBI Act of 1934. Explore the roles of RBI as the issuer of currency and its responsibilities as a banker, representative, and advisor to the State Governments.