RBI stands for Reserve Bank of India.

It is the Central Bank of India, recognized as

statutory body by RBI Act1934. Raghuram Rajan is the present governor of RBI.
One of the main functions of RBI is to control and regulate the financial institutions
of the country. It is therefore also responsible for laying down Monetary policy bimonthly to control inflation.
Monetary policy deals with regulating the price and stability of Indian rupee.
Inflation means decrease in the purchasing power or money. Rising inflation has a
lots of negative impacts on the economy. It leads to negative real interest rate,
hence fall in the credit rating, which in turn would lead to the decrease in the
confidence of investors in the economy. Thereby leading to slowdown in growth.
As the central bank of India, RBI regulates inflation within the range laid down by
Urijit Patel Committee, using the various quantitative and qualitative tools. The
Quantitative tool comprises of methods which directly deals with controlling the
amount and value of money in economy. The underlying concept being - in order to
control inflation, decrease money supply in circulation, which leads to lesser
demand of goods, hence decrease in the prices. The amount of money in the
system is directly controlled by RBI through tools such as Cash Reserve Ratio (CRR),
Statutory Liquidity Ratio (SLR) and Liquidity Adjustment Facility (LAF), Marginal
Standing Facility (MSF) and Open Market Operations.
Banks, as per Banking Regulation Act49 are required to keep certain amount of
their net demand and liability as reserve with RBI in the form of CRR ( cash) and SLR
( government approved security, gold or cash) This reserve therefore is not used by
banks for lending purpose. To control inflation, RBI increases CRR and SLR.
Alternatively it can also increase Repo rate (the rate at which RBI lends money to
banks) or bank rate (rate at which RBI lends money to banks for long term ) or MSF
( overnight lending rate ) to control the supply as well. Besides, RBI can also use
Open Market Operations and sell government securities thereby sucking liquidity
from market.
Qualitative tools mainly comprises of general methods like issuing guidelines or
Moral suasion or increasing/decreasing the down payment limit for the purchase of
property or goods as per the requirement.
As of now RBI has managed to control inflation within specified range and has also
decreased the Repo rate by 50 basis point to 6.75 % while keeping CRR/SLR
unchanged in the 4th bimonthly policy meeting. This is a positive sign for Indian
economy which indicates stability in terms of inflation.