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Reserve Bank of India

Reserve Bank of India (RBI) - Establishment, Functions, Monetary Policy, Banker to Banks, Banker to Government, Governors and important notes for TNPSC exams.

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🏦 Reserve Bank of India (RBI)

Central Bank of India - The regulator of the country's monetary policy

📊 RBI Overview - SVG
🏦 Reserve Bank of India 📅 Company 1 April 1935 RBI Act, 1934 | Headquarters: Mumbai Nationalization: 1 January 1949 RBI Central Bank Central Bank of India 💵 Note issue 🏛️ Government Bank Banker to Govt 🏦 Bank of banks Banker to Banks 📊 Monetary policy Monetary Policy 💱 Foreign exchange Forex Management 💳 Credit control Credit Control 📋 Banking supervision Bank Regulation 👤 RBI Governor First Governor: Sir Osborne Smith (1935) First Indian Governor: C.T. Deshmukh (1943) Current Governor: Sanjay Malhotra (2024) 📌 Important information Institute: 1935 Nationalism: 1949 Headquarters: Mumbai Act: RBI Act 1934 Hilton Young Commission Recommendation: 1926 Share Capital: ₹5 Crore
📌 Basic information
Company 1 April 1935
Law RBI Act, 1934
recommendation Hilton Young Commission (1926)
Nationalism 1 January 1949
headquarters Mumbai
Initial capital ₹5 crore
👤 Principal Governors
First Governor Sir Osborne Smith
First Indian CT Deshmukh(1943)
Current Sanjay Malhotra(2024)
A long time Bengal Rama Rao (7 yrs)

⚙️ Functions of RBI

📊 RBI Functions - SVG
⚙️ 7 Major Functions of RBI 1️⃣ Note Issue • All notes except ₹1 will be issued by RBI • ₹1 Note – Issued by Ministry of Finance • Minimum Reserve System (1957) - ₹200 Cr Gold + Forex 2️⃣ Banker to Government • Bank of Central + State Govts • Maintenance of Government Accounts • Loan to Govt (Ways & Means Advances) 3️⃣ Banker's Bank • Maintenance of CRR, SLR • Lender of Last Resort - Lender of last resort • Clearing House operation 4️⃣ Monetary Policy • Controlling inflation • Determination of Repo Rate, Reverse Repo • MPC (Monetary Policy Committee) - 6 members 5️⃣ Credit Control Quantitative Methods: • Bank Rate, Repo Rate, CRR, SLR, OMO Qualitative Methods: • Margin Requirements, Credit Rationing, Moral Suasion 6️⃣ Forex Management • Operation under FEMA Act, 1999 • Maintenance of Foreign Exchange Reserves • Exchange Rate Management • Present: $600+ Billion Reserves 7️⃣ Banking Regulation • Banking Regulation Act, 1949 • Issuance / Cancellation of Banking License • Conducting Inspection & Audit 🔧 Monetary Policy Tools Repo Rate RBI → Banks credit 6.50% Reverse Repo Banks → RBI Deposits 3.35% CRR Cash Reserve Ratio 4.50% SLR Statutory Liquidity 18% Bank Rate Long-term Lending 6.75% MSF Rate Marginal Standing 6.75% OMO Open Market Operations Buy/Sell Govt Securities
📊 Credit control methods
Quantitative Methods Qualitative Methods
1 Bank Rate 1 Margin Requirements
2 Repo Rate 2 Credit Rationing
3 CRR (Cash Reserve Ratio) 3 Moral Persuasion
4 SLR (Statutory Liquidity Ratio) 4 Direct Action
5 Open Market Operations 5 Consumer Credit Regulation

📊 Monetary Policy Committee (MPC)

📊 MPC Structure - SVG
📊 Monetary Policy Committee (MPC) – 2016 MPC 6 Members Chairman: RBI Governor 🏦 RBI Members (3) 1. RBI Governor 2. RBI Deputy Governor (In-charge of Monetary Policy) 3. RBI Officer (Central Board Nominated) 🏛️ Govt Appointment (3) 1. Economist 2. Economist 3. Economist • Appointment of Central Govt • Tenure of 4 years 🗳️ Method of Voting 1 vote for each | Governor Casting Vote in a tie 📈 Key Interest Rates (Dec 2024) Repo Rate 6.50% Reverse Repo 3.35% Bank Rate 6.75% CRR 4.50% SLR: 18% | MSF: 6.75% | Inflation Target: 4% (±2%)
📊 MPC vs RBI Board - Comparison
feature MPC RBI Central Board
Company 2016 (Amendment of RBI Act) 1935
members 6 people 21 people (Maximum)
Chairman RBI Governor RBI Governor
task Determination of Repo Rate RBI Administration
crowd At least 4 times/year 6 times/year
target Inflation 4% (±2%) Overall RBI Functions
🔥 Rate Relationships - Important!
📌 Rate Order (Low to High):
Reverse Repo (3.35%)<Repo Rate (6.50%)<MSF/Bank Rate (6.75%)
🎯 Why this order?
• Reverse Repo < Repo: To discourage banks from depositing with RBI
• Repo < MSF: Penalty for emergency borrowing
• MSF = Bank Rate (from 2024 onwards)

🎯 TNPSC Shortcuts - RBI!

🧠 Memory Tricks - SVG
🧠 TNPSC Memory Tricks - RBI 📅 Company Date Trick "1-4-35, 1-1-49" 1 April 1935 = Institution 1 Jan 1949 = Nationalisation 👤 Governor Trick "OSS - CDT" First: Osborne Smith (British) First Indian: C.D. Deshmukh 📈 Rate Order Trick "RRR < Repo < MSF = Bank" Reverse Repo < Repo Rate < MSF = Bank Rate 3.35% < 6.50% < 6.75% 👥 MPC Trick "3 + 3 = 6" 3 RBI (Gov, Dep Gov, Officer) 3 Govt Nominated Experts 💰 CRR vs SLR Trick "CRR = Cash, SLR = Securities" CRR: Cash with RBI (4.50%) SLR: Liquid Assets - Gold, Govt Securities (18%) ⚙️ 7 Functions Trick "NIBBM CF R" Note Issue, Banker to Banks, Banker to Govt Monetary Policy, Credit Control, Forex, Regulation 🔥 TNPSC Quick Facts • Issuance of ₹1 note: Ministry of Finance (not RBI) • Tree in RBI Logo: Palm Tree • RBI Emblem: East India Company Double Mohur Coin • Inflation Target: 4% (2% - 6% Range) • Hilton Young Commission: 1926 • Initial Capital: ₹5 Crore • Longest Serving: Benegal Rama Rau (7 yrs) • MPC Meetings: Min 4 per year "RBI = Currency Guardian"
📝 TNPSC One-Liners
1 Year RBI was established? 1 April 1935
2 Nationalization of RBI? 1 January 1949
3 First Governor? Sir Osborne Smith (British)
4 First Indian Governor? CT C.D. Deshmukh
5 Current Governor? Sanjay Malhotra (2024)
6 RBI Headquarters? Mumbai
7 Who will issue ₹1 note? Ministry of Finance
8 How many MPC members are there? 6 (3 RBI + 3 Govt)
9 Inflation Target? 4% (±2% = 2% to 6%)
10 RBI recommends which Commission? Hilton Young Commission (1926)
🔥 FAQ - Frequently Asked Questions
Q1:What is Repo Rate?
A: RBI Short Term Lending Rate to Banks (Repurchase Agreement)
Q2:Difference between CRR vs SLR?
A: CRR = Cash Deposit with RBI, SLR = Holding of Gold/Government Securities
Q3:What is Lender of Last Resort?
A: RBI lends when banks have no other option – last resort
Q4:What is FEMA?
A: Foreign Exchange Management Act, 1999 - Foreign Exchange Management Act
🎯 Quick Revision - Rates
Rate ratio Explanation
Repo Rate 6.50% RBI → Banks Short-term Lending
Reverse Repo 3.35% Banks → RBI Deposit Rate
Bank Rate 6.75% Long-term Lending Rate
MSF Rate 6.75% Marginal Standing Facility
CRR 4.50% Cash Reserve with RBI
SLR 18% Statutory Liquidity Ratio
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