General Awareness about Central Bank( Reserve Bank of India (RBI)) for Coming RBI, IBPS PO, UPSC,SSC CGL Exams

General Awareness about Reserve Bank of India (RBI)

Now a days almost every country has a Central Bank. The Central Bank acts as the central monetary authority of the country. It controls the banking system, guides the lending policy of the different banks in the country, enforces the monetary and banking laws and regulations. In some countries, the central bank is a government, e.g., India. In some countries the central bank is privately owned, e.g., USA. Privately owned central banks are, however, conducted according to principles laid down by the government. In India the central bank is known by the name of Reserve Bank of India (RBI). The central bank is a very necessary institution. When a bank fails a large number of innocent depositors lose their money and suffer distress. Central banks have been established for the purpose of controlling and guiding the other banks so that they follow sound methods and do nothing which will injure the country's interests.

     The Reserve Bank of india (Amendment) Bill 2006 was enacted in the June 2006. The amendment to the subsection(1) of section 42  of the Reserve Bank of India Act, 1934, vests RBI with the power to prescribe CRR for scheduled banks without any floor or ceiling rate there by removing the statutory minimum CRR limit of 3.0%.

Functions:

The functions usually performed by a central bank are described below.

1. The central bank determines the volume of note issue. It issues notes according to the procedure laid down by law. Since paper money forms the major part of the legal tender money of every country and since the central bank issues notes we can say that it determines the volume of money supply in a country.
2. The central bank controls the volume of credit of bank money in the country. This is generally done by altering the amount of cash available to the banks for their reserves. Various methods are available to the central banks for controlling credit.
3. The central bank is the banker of the banks. All banks have account with the central bank. they have to keep a certain percentage of their deposits in the form of cash with the central bank. When a bank is in difficulty, it can borrow from the central bank. Loans are given against government promissory notes and gold and also by rediscounting first class commercial papers.
4. The central bank is the banker of the government. Money belonging to the government is kept with it. It gives short-term loans to the government. It manages the public debt, i.e., it does, on behalf of the government, all work in connection with the debt, e.g., payment of interest, renewal of the scrips, repayment of the money when due etc..
5. The central bank is responsible for the stability of the rate of foreign exchange between a country's currency and foreign currencies. Various measures have to be adopted for maintaining stable exchange rates, e.g., purchase and sale of gold, foreign currencies and foreign securities control over private transactions which involve foreign payments, etc. The central bank is in charge of the these operations.
6. The central bank is responsible for the safety and stability of the banking system. The central bank can inspect the work of any private bank with a view to finding out whether it is following sound methods of business. If it does not, the central bank can take disciplinary measures like suspending or cancelling its licence. The central bank gives advice and assistance to the other banks. It acts as their "friend, philosopher and guide".
7. The central bank has the duty of keeping the volume of Money stable as far as possible. For example, the Reserve Bank of India takes steps for the control of inflation in the country.
8. In certain countries the central bank is entrusted with the duty of developing monetary and banking institutions which are backward. For example, in India the central bank(RBI) has to look after the system of agricultural finance.

The functions performed by the Reserve Bank of India are all of great important. The soundness of the monetary and the banking system of the country depends on the efficiency of the Central Bank.

Important Links:

• National International Sports Current Affairs
• Economy (Business & Banking) Current Affairs
• Marketing Aptitude Practice Paper