Note4Students
From UPSC perspective, the following things are important :
Prelims level: Evolution of RBI's Monetary Policy
Why in the News?
The first monetary policy of RBI Governor Sanjay Malhotra in 2025 marks 90 years since the Reserve Bank of India (RBI) announced its inaugural monetary policy in 1935.
RBI’s First Monetary Policy in 1935
Evolution of RBI’s Monetary Policy
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About Reserve Bank of India (RBI)
- The RBI is the central bank and monetary authority of India established on April 1, 1935, under the Reserve Bank of India Act, 1934.
- Its idea was incepted from the recommendations of the Hilton Young Commission.
- Sir Osborne Arkell Smith, an Australian, served as the inaugural Governor.
- He was succeeded by Sir C D Deshmukh, the first Indian to hold the position.
- It is a centralized institution for India to effectively regulate its monetary and credit policies.
- RBI had its initial headquarters in Kolkata, later moving permanently to Mumbai in 1937.
- Initially, the RBI operated as a privately owned entity until its full nationalization in 1949.
Functions and Initiatives:
- Monetary Authority: The RBI controls the supply of money in the economy to stabilize exchange rates, maintain a healthy balance of payment, and control inflation.
- Issuer of Currency: Sole authority to issue currency and combat circulation of counterfeit notes.
- Banker to the Government: Acts as a banker to both the Central and State governments, providing short-term credit and financial advisory services.
- Lender of Last Resort: Provides emergency liquidity assistance to banks during crises.
- Custodian of Foreign Exchange Reserves: Manages foreign exchange reserves and administers the Foreign Exchange Management Act, 1999 (FEMA).
- Regulator and Supervisor of Payment and Settlement Systems: Oversees payment and settlement systems in the country, ensuring efficiency and security.
- Credit Control and Developmental Role: Promotes credit availability to productive sectors and fosters financial infrastructure development.
Dr. Ambedkar’s Role in the Establishment of RBI:
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[UPSC 2004] Consider the following statements:
1. Reserve Bank of India was nationalized on 26 January 1950. 2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 |
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