The basic functions of RBI (Reserve Bank of India) are “to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”In addition, to control the supply of portable money circulation, Reserve Bank of India regulates ‘Bank credit’, through bank rate, reserve requirement (Statutory Liquidity Ratio (SLR)/Cash Reserve Ratio (CRR), open market operations, interest rate policy, selective credit control measure, etc. RBI prescribes certain exposure limits/rates of interest on Agriculture, SSI, Exporters, small and medium enterprises; housing loans and channelizes bulk bank credit towards Priority Sector advances. Through its various reports and data collected from banks, RBI assesses the lendable quantum of bank finance and announces Credit Policy in April every year. Credit policy review is done quarterly during the months of June, October, and December every year. The other major functions of RBI are as under.
1. Acts as Currency Notes issuing Authority.
2. Acts as banker to Central and State Governments.
3. Acts as Banker’s Bank, as it lends to commercial banks, in case of Liquidity problem faced by them.
4. Functions as a promoter of Agriculture and Industries in the country to accelerate the pace of economic development
5. Regulates transactions in foreign exchange.
6. Supervises and controls banks, financial institutions and NBFC (Non-Banking Financial Companies).
7. RBI checks inflation by regulating the money supply and bank credit.
8. RBI functions as adviser to Government of India in its budgetary and policy planning.