Role and function of RBI -

RBI was established in April 1935 and was nationalised in the year
1949.the bank was constituted for the need of following :
•to regulate the issue of bank notes.
•to maintain minimum reserve for monetary/price stability.
•to operate the creit and currency system of the country.

Functions of RBI -
1) Banking functions :
- under the section 22 of the RBI act, the bank has a right to
issue bank notes.
- the RBI is the agent of the central and the state
government.The RBI has the obligations for the business
transactions of the government i.e. to recieve and make
payments on behalf of central and state government
and other banking operations.
- RBI is the banker's bank.All the banks must maintain the
minimum cash balance with RBI.The minimum cash
requirement can be changed by RBI time to time.
- RBI is the controller of the credit i.e. it has the power to
influence the volume of the credit by the nationalized
private sector and foreign banks in India.It also include corporate banks
to maintain CRR.
2) Supervisory Function -
- The RBI, a central bank of India,is a regulatory body for all
the banks of India.under the RBI act 1934 and banking
regulation act of 1949, the RBI has the power to control and regulate
commercial and cooperative banks i.e. it is the liscencing authority for
establishment,branch expansion liquidity of their assets , management
and the methods of working merger and liquidations,reconstruction and
various other functions.
3) Promotional Functions -
- The RBI performs a variety of promotional fuctions i.e. to
promote banking habits, extent banking facilities to rural and
semi urban areas and to establish new organisations Like IFCI and
straight financial corporations, Industrial
Development banks of India(1964),Agricultural refinance corporation of
India and industrial reconstruction corporation of india.RBI
also established agricultural credit and agricultural
refinance and development corporations for long term financing.
4)Other Functions -
- RBi is the administration for foreign exchange
management act of 1999 to facilitate external trade
payment and to promote the foreign exchange market in India.
- The RBI maintain banking accounts of all the registered
banks of India.
- It is the responsibility of the RBI to maintain the price
stability.
- To ensure sufficent flow of credit to the productive sectors.
- To maintain the public confidence in the banking system
by protecting the pedositor's interest.
- To provide cost effective banking services to the public.

Banking sector reforms -

The government of india intiated banking sector reforms -
- To insure capital adequacy.
- consolidation of banking system.
- restructuring of weak public sector banks.
- technological improvement in the banking sectors.
- disclosure standards as per the international practices.
- scientific tools for the risk management.
- Legal reforms to recover NPA's (non performing assets)