The Reserve Bank of India is India’s central bank and also recognized as the banker’s bank. The Reserve Bank of India was established on 1st April 1935 by the provisions of the Reserve Bank of India Act, 1934. The main office of the Reserve Bank was founded in Calcutta but 1937 it was permanently shifted to Mumbai. In the main office, the Governor sits and policies are invented. Since nationalization, the Reserve Bank is completely owned by the Government of India in 1949. Over the years, the Reserve Bank of India had inferred a notable job in the financial role of events and money associated solidness in India.
Historical Background:-
The Reserve Bank of India was established based on the recommendations of the Hilton Young Commission. The Reserve Bank of India Act, 1934 gives the statutory purpose of the functioning of the Bank which initiated operations on April 1, 1935. The major issue of the Reserve Bank of India is to govern the issue of banknotes, supervision of reserves to ensure financial stability in India, mainly to regulate the currency and credit system of India.
The Reserve Bank of India allocated its first currency notes in January 1938 in the denomination of 5 and 10 rupees.
The currency branches of the issue department of the Reserve Bank of India were established at Madras, Rangoon, Karachi, Calcutta, Bombay, Lahore and Cawnpore. Offices of the Banking Department were ascertained in Calcutta, Bombay, Madras, Delhi and Rangoon.[1]
According to the provisions of the Reserve Bank of India Act, 1934 the Reserve bank of India is encompassed of the administration of currency and for holding the business of banking.
Major Provisions of Reserve Bank of India Act, 1934:-
Major Provisions of Reserve Bank of India Act, 1934 are given below:
Section 3 of the RBI Act gives for the establishment of the Reserve Bank of India for taking over the administration of the currency from the Central Government and for taking on the corporation of banking by the provisions of this Act.
Section 4 of the RBI Act deals with the capital of the Bank. The capital of the Bank shall be 5 crores of rupees.
Section 6 of the RBI Act deals with the establishment of offices, departments and agencies.
Section 7 of the RBI Act authorizes the central government to issue advice in the public interest to the bank in consultation with RBI Governor. This provision also gives the power of superintendence and way of the conspiracies and business of RBI to the Central Board of Directors.
Section 8 of the RBI Act deal with the configuration of the central board of the Reserve Bank of India.
Section 17 of the RBI Act deals with the functioning of RBI. The Reserve Bank of India can approve deposits from the central and state governments without any interest. It can acquire and discount bills of exchange from commercial banks. It can acquire foreign exchange from banks and auction it to them. It can give loans to banks and state economic corporations. It can obtain government securities. It can deal in the secondary, repo and reverse repo.
Section 18 of the RBI Act clarifies emergency loans to commercial banks.
Section 21 of the RBI Act authorizes RBI the duty of being a banker to the central government and regulate public deficit.
Section 22 of the RBI Act mandates power to RBI to allocate the currency in the nation.
Section 23 of the RBI Act deal with the issue department.
Section 24 of the RBI Act stated that the highest denomination note could be 10,000 rupees.
Section 25 of the RBI Act deal with an aspect of banknotes.
Section 26 of the RBI Act describes the legal tender identity of notes. Section 26(a) stated that specific banknotes cease to be lawful tender.
Section 27 of the RBI Act upholds the re-issue of notes.
Section 28 of the RBI Act authorizes the RBI to establish statutes about the exchange of damaged and defective rupee. Section 28(a) describes the issue of special bank notes and special one rupee notes in specific issues.
Section 29 of the RBI Act held the bank immune from stamp duty on banknotes.
Section 30 of the RBI Act deals with the powers of the Central Government to replace Central Board. Under this provision, the central government can renovate the Central Board.
Section 31of RBI Act can grant demand bills and notes.
Section 37 of the RBI Act deals with the suspension of purchases regulations as to foreign securities.
Section 38 upheld the commitment of the Government and the Bank in respect of the rupee coin.
Section 39 of the RBI Act deal with the obligation to provide various forms of currency.
Section 40 allows RBI to transactions in foreign exchange.
Section 42 permits RBI to reserve the cash of scheduled banks to be protected with the Bank.
Section 43 deal with the publication of a compressed statement by the Bank.
Section 45(b) of the RBI Act described the power of the Bank to receive credit data.
Section 45(c) of the RBI Act described the power to call for returns incorporating credit data.
Section 45(IA) of the RBI Act described the requirement of enrollment and net acquired fund.
Section 45(IB) of the RBI Act despite the supervision of the proportion of assets.
Section 45(IC) of the RBI Act deal with the reserve fund.
Section 45(J) describes the bank to legislate or restrict the issue of prospectus or advertisement summoning deposits of currency.
Section 45(JA) of the RBI Act empowers the power of the Bank to infer policy and issue recommendations.
Section 45(k) of the RBI Act upheld the power of the Bank to receive data from non-banking institutions as to deposits and to provide directions.
Section 45(l) of the RBI Act provides the Power of the Bank to call for information from economical institutions and to provide directions.
Section 45(m) of the RBI Act upheld the duty of non-banking institutions to provide announcements compelled by the Bank.
Section 45(MA) of the RBI Act deal with the powers and obligations of auditors.
Section 45(MB) of the RBI Act describes the power of the Bank to restrict approval of deposit and alienation of assets.
Section 45(ZA) of the RBI Act deal with the inflation target.
Section 45(ZB) of the RBI Act upheld the Constitution of the Monetary Policy Committee.
Section 45(ZM) of the RBI Act authorizes the Monetary Policy Report.
Section 46 of the RBI Act stated the contribution by Central Government to the Reserve Fund.
Section 58 of the RBI Act allowed the Central Board to formulate regulations.[2]
Conclusion:-
Reserve Bank of India is the central bank of India which plays a significant role in the banking industry, advancement and growth of the Indian economy. It plays the guardian role to the commercial banks and other banking sectors of India.
By Shreeparna Goswami, 3rd year of Shyambazar Law College.
[1] RBI History – Brief History,. https://rbi.org.in/history/Brief_History.html#:~:text=The%20Reserve%20Bank%20of%20India%20Act%2C%201934%20(II%20of%201934,operations%20on%20April%201%2C%201935.&text=*%20To%20operate%20the%20credit%20and,the%20country%20to%20its%20advantage.&text=The%20Bank%2C%20which%20was%20originally,bank%2C%20was%20nationalised%20in%201949.
[2] Important Sections in Reserve Bank of India Act 1934 – Exampundit.in, https://exampundit.in/important-sections-in-reserve-bank-of-india-act-1934/.
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