Question

Classify the various functions of the Reserve Bank of India.

Answer 1

The functions of the RBI can be grouped under three heads:
(i) Leadership and Supervisory Functions, (ii) Traditional Functions and, (iii) Promotional Functions.

(i) Leadership and Supervisory Functions:

1. India’s Representative in World Financial Institutions
2. Regulator and Supervisor of Indian Banking System
3. Monetary Authority
4. Closely Monitoring Economic Parameters
5. Promptly Responding to New Challenges

(ii) Traditional Functions:

1. Banker and Financial Advisor to the Government
2. The monopoly of Note Issue
3. Banker’s Bank
4. Controller of Credit and Liquidity
5. Quantitative Methods of Credit Control
6. Qualitative Credit Control Measures
7. Lender of the Last Resort
8. Clearing House Services
9. Custodian of Foreign Exchange Reserves
10. Maintenance of Foreign Exchange Rate
11. Collection and Publication of Authentic Data

(iii) Promotional Functions:

1. Nurturing Banking Habits among the Public
2. Grievance Settlement Measures
3. Agricultural Development
4. Promotion of Small Scale Industries
5. Facilitates Foreign Trade
6. Supports Cooperative Sector