📘 Day 2: Banking Regulation – RBI’s Structure, Objectives & Functions
This is from Unit 2 of your book:
“Banking Regulation” – where you learn about how and why RBI regulates banks.
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🧠 Key Learning Areas:
1. RBI’s Legal Foundation
Formed under RBI Act, 1934
Became a state-owned institution in 1948
Controls India’s monetary policy, currency issue, and banking supervision
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🎯 Objectives of RBI (as per the Preamble of the RBI Act):
1. Maintain monetary stability
2. Ensure financial system stability
3. Promote a secure payment system
4. Guide credit flow in line with economic & social priorities
5. Develop financial markets and systems
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🏦 RBI’s Main Functions:
Function Description
Notes Issuance Sole authority to issue currency (except ₹1 note/coins which are by Govt. of India)
Government’s Banker Manages deposits, payments, receipts, public debt
Banker’s Bank Supervises banks, controls credit flow via CRR, SLR, repo, etc.
Bank Supervision Through Board for Financial Supervision (BFS) — inspects, licenses, merges, or dissolves banks
Development Role Helped create institutions like NABARD, SIDBI, EXIM Bank, DICGC
Exchange Control Manages forex via FEMA, maintains rupee stability
Monetary Control Uses CRR, SLR, Bank Rate, OMO to control inflation/liquidity
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📌 Fun Fact:
The Governor of RBI is appointed by the Central Government along with 4 Deputy Governors and a Central Board of Directors.
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❓ Practice MCQs:
1. What is the main objective of RBI under its Act?
a) Control inflation only
b) Promote exports
c) Secure monetary and credit stability ✅
d) Manage commercial banks only
2. Which of the following is not a function of RBI?
a) Issuing currency
b) Acting as a banker to government
c) Issuing insurance policies ✅
d) Supervising banks
3. Which act empowers RBI to regulate forex transactions?
a) FEMA ✅
b) FERA
c) SEBI Act
d) BR Act
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✅ Your Quick Task:
Tonight, before bed:
Revise RBI’s 7 core functions mentally.
Think about how each one affects your daily work in banking.
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