India to Boost Economic Self-Reliance and Promote Global Rupee Acceptance

India must enhance its economic self-reliance over the next decade to lessen the impact of global crises and promote the global acceptance of the rupee, according to Prime Minister Narendra Modi. At the inauguration of the Reserve Bank of India's (RBI) 90th anniversary celebration in Mumbai, PM Modi emphasized the need for increased self-reliance. By commemorating the 90 years since the RBI's founding on April 1, 1935, he also released a commemorative coin.

Prime Minister Narendra Modi said India needs to increase its economic self-reliance in the next 10 years to mitigate the impact of global crises, and make rupee more accessible and acceptable throughout the world.

PM Modi was addressing the opening ceremony of the 90th anniversary celebrations of the Reserve Bank of India (RBI) in Mumbai on April 1. 

The RBI commenced its operations on April 1, 1935.

The Prime Minister also released a commemorative coin to mark 90 years of the RBI.

History of RBI 

• The Reserve Bank of India is the central bank of the country. 

• Most central banks, as we know them today, were established around the early 20th century.

• The RBI was set up on the basis of the recommendations of the Hilton Young Commission. 

• The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935.

• Sir Osborne Smith was appointed as the first governor of the RBI. 

• In August 1943, Sir C.D. Deshmukh was appointed as the first Indian governor of the RBI.

The Bank was constituted to

i) Regulate the issue of banknotes.

ii) Maintain reserves with a view to securing monetary stability.

iii) To operate the credit and currency system of the country to its advantage.

• The Bank began its operations by taking over from the government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of government accounts and public debt. 

• The currency offices at Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore and Cawnpore (Kanpur) became branches of the Issue Department. 

• Offices of the Banking Department were established in Calcutta, Bombay, Madras, Delhi and Rangoon.

• Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve Bank continued to act as the Central Bank for Burma till Japanese Occupation of Burma and later up to April 1947. 

• After the Partition, the Reserve Bank served as the central bank of Pakistan up to June 1948 when the State Bank of Pakistan commenced operations.

• The RBI, which was originally set up as a shareholder’s bank, was nationalised in 1949.

• An interesting feature of the Reserve Bank of India was that at its very inception, the Bank was seen as playing a special role in the context of development, especially agriculture. 

• When India commenced its plan endeavours, the development role of the Bank came into focus, especially in the 1960s when the Reserve Bank, in many ways, pioneered the concept and practice of using finance to catalyse development.

• The Bank was also instrumental in institutional development and helped set up institutions like the Deposit Insurance and Credit Guarantee Corporation of India, the Unit Trust of India, the Industrial Development Bank of India, the National Bank of Agriculture and Rural Development (NABARD), the Discount and Finance House of India, etc to build the financial infrastructure of the country.

• With liberalisation, the Bank’s focus has shifted back to core central banking functions like Monetary Policy, Bank Supervision and Regulation, and Overseeing the Payments System and onto developing the financial markets.

• The RBI has four zonal offices at Chennai, New Delhi, Kolkata and Mumbai. It has offices at 33 locations across India.

• As the central bank of India, RBI is an independent apex monetary authority which regulates banks and provides important financial services like storing of foreign exchange reserves, control of inflation, monetary policy report.

• A central bank is a vital financial apex institution of an economy and the key objectives of central banks may differ from country to country. Still, they perform activities and functions with the goal of maintaining economic stability and growth of an economy.

• The RBI plays an important part in the development strategy of the country. 

• The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors. 

• It consists of the governor, four deputy governors, two finance ministry representatives, 10 government-nominated directors to represent important elements of India’s economy, and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi.

Main functions of RBI

• Monetary Authority: Formulates, implements and monitors the monetary policy. 

-Objective: Maintaining price stability while keeping in mind the objective of growth.

• Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.

- Objective: Maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

• Manager of foreign exchange: Manages the Foreign Exchange Management Act, 1999.

- Objective: To facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

• Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation. 

- Objective: To give the public adequate quantity of supplies of currency notes and coins and in good quality.

• Developmental role: Performs a wide range of promotional functions to support national objectives.

• Regulator and supervisor of payment and settlement systems: Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.

- Objective: Maintain public confidence in payment and settlement system

• Banker to the government: Performs merchant banking function for the central and the state governments. Also acts as their banker.

• Banker to banks: Maintains banking accounts of all scheduled banks.