Why in the News?
The Union government appointed Sanjay Malhotra, the current Revenue Secretary, as the 26th Governor of the Reserve Bank of India (RBI) on Monday (December 9). Malhotra will take over from Shaktikanta Das, who has led India’s central bank for the past six years and will serve a three-year term.
About RBI
- It is the central regulatory authority responsible for overseeing India's banking system and managing the money supply to ensure economic stability.
- Objectives of the RBI:
- Regulate the issuance of banknotes.
- Maintain monetary stability by holding reserves.
- Operate the nation's credit and currency systems.
- Balance price stability with economic growth.
- Historical Milestones:
- 1926: Hilton Young Commission recommends establishing a central bank.
- 1934: RBI Act passed, providing its legal framework.
- 1935: RBI commenced operations in Calcutta.
- 1937: Headquarters shifted to Mumbai.
- 1949: Nationalized to become a government-owned entity, making India the first British colony with a central bank.
- Functions of the RBI:
- Currency Issuance: Issues all notes except ₹1 and coins, which are managed by the Government of India.
- Government’s Banker: Handles accounts, securities, and provides financial advice to the government.
- Bankers’ Bank: Maintains reserves, provides financial assistance, and rediscounts bills for commercial banks.
- Lender of Last Resort: Offers emergency financial support to banks.
- Forex Management: Maintains foreign exchange reserves to stabilize the rupee and support trade.
- Credit Control: Regulates money supply to manage inflation and deflation.
- Regulation of Banks: Licenses banks and sets operational standards under the RBI Act, 1934, and Banking Regulation Act, 1949.
- Promotional Activities: Promotes financial inclusion, digital banking, consumer education, and international banking growth.
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