Reserve Bank of India facts for kids
 Seal of the Reserve Bank of India  Logo of the Reserve Bank of India |
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| Headquarters | Mumbai, India |
|---|---|
| Coordinates | 18°56′00″N 72°50′11″E / 18.93324°N 72.83646°E |
| Established | 1 April 1935 |
| Governor | Shaktikanta Das, IAS (retd.) |
| Key people |
Deputy Governors
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| Central bank of |  India |
| Currency | Indian rupee (₹) INR (ISO 4217) |
| Reserves |  $623.200 billion(as of 7 January 2024[update]) |
| Bank rate | 6.75% |
| Interest on reserves | 3.35% (market determined) |
| Reserve Bank of India | |
| Agency overview | |
| Jurisdiction | Government of India |
| Key document |
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The Reserve Bank of India, also known as RBI, is India's main bank. It is like the central bank for the whole country. The RBI helps manage India's money system. It is owned by the Ministry of Finance, which is part of the Government of India.
The RBI is in charge of printing and giving out the Indian rupee, which is India's money. It also makes sure there is enough money for everyone. The RBI helps manage how people pay for things and works to make India's economy grow.
A special part of the RBI, called Bharatiya Reserve Bank Note Mudran (BRBNM), prints Indian money notes. They have two printing places: one in Mysore and another in Salboni. The RBI also helped create the National Payments Corporation of India. This group helps make sure payments in India work smoothly. Another part, the Deposit Insurance and Credit Guarantee Corporation, helps protect money that people deposit in banks.
The RBI started working on April 1, 1935. It became a government-owned bank on January 1, 1949, after India became independent.
Contents
What the RBI Does
The main goals of the Reserve Bank of India are to control how banknotes are issued. It also keeps money safe to make sure India's money system is stable. The RBI works to manage the country's money and credit system for India's benefit. It also aims to keep prices stable while helping the economy grow.
History of the RBI
The Reserve Bank of India was created in 1934. At first, private owners ran it. But in 1949, the government took full control. Since then, the Ministry of Finance owns it completely.
Early Years (1935–1949)
The RBI started on April 1, 1935. It was set up to help with money problems after the First World War. The idea for the bank came from a special group called the Hilton Young Commission in 1926. India was the first colony to have its own central bank.
The first idea for the RBI's symbol was a lion and a palm tree. But they decided to use a tiger instead, because the tiger is India's national animal. The RBI's main office was first in Calcutta (now Kolkata). It moved to Bombay (now Mumbai) in 1937.
The RBI also acted as the central bank for Burma (now Myanmar) until 1947. After India was divided in 1947, the RBI also served as the central bank for Pakistan until 1948. Since 1949, the RBI is the only group allowed to print money in India.
Growing with India (1950–1960)
In the 1950s, India's first Prime Minister, Jawaharlal Nehru, planned the economy. He focused on farming. The government took control of many banks. The RBI was then asked to help control these banks. The central bank also helped the economy by giving out loans.
Protecting Deposits (1961–1968)
After some banks failed, the RBI was asked to create a system to protect people's money deposits. This system started on December 7, 1961. It helped people trust banks again. The government wanted to help the economy grow. The RBI became very important in guiding and supporting the public banks.
More Banks Under Government (1969–1984)
In 1969, the government, led by Indira Gandhi, took control of 14 big banks. Later, in 1980, six more banks were taken over. The government made more rules for the economy and banks in the 1970s and 1980s. The RBI became a key player. It made many rules about interest rates and how much money banks should keep. These rules helped guide banks to lend money to important areas like farming and small businesses.
Economic Changes (1985–1990)
Many groups studied India's economy between 1985 and 1989. Their ideas influenced the RBI. New groups were set up to help the economy. For example, the National Housing Bank was created in 1988 to help with housing loans. New laws also helped make banking safer.
Opening Up the Economy (1991–1999)
In 1991, the Indian rupee lost some of its value. A committee suggested making changes to the banking system. New rules in 1993 allowed private banks to start. This was a big change to make the market stronger. The RBI also made some interest rates more flexible. This first phase was successful. In 1998, the government allowed more variety in bank ownership.
The National Stock Exchange of India started trading in 1994. The RBI also created a company called Bharatiya Reserve Bank Note Mudran Private Limited in 1995 to print banknotes.
New Millennium (2000 - 2009)
A new law, the Foreign Exchange Management Act, 1999, started in 2000. It helped with international trade and payments. In 2006, a new company, Security Printing & Minting Corporation of India Ltd., was formed. It prints banknotes and makes coins.
Recent Times (Since 2010)
In 2016, the government changed the RBI Act. They created the Monetary Policy Committee (MPC). This committee now helps decide interest rates. The RBI governor is part of this committee and has a deciding vote if there is a tie.
In 2018, the RBI said banks should not deal with virtual currencies like Bitcoin. But in 2020, the Supreme Court of India said the RBI did not show enough harm to ban them. So, the ban was removed.
How the RBI is Organized
The main group that leads the RBI is the central board of directors. The Government of India chooses these directors for four years. The board includes the governor and up to four deputy governors. It also has people from the Ministry of Finance and other experts.
Two of the deputy governors usually come from the RBI itself. One is chosen from public sector banks, and another is an economist. Sometimes, an Indian Administrative Service officer can also become a deputy governor or even the governor.
The current governor of the RBI is Shaktikanta Das. There are four deputy governors: Swaminathan J, M. Rajeshwar Rao, Michael Patra, and T. Rabi Shankar.
RBI Branches and Support
The RBI has four main offices in different parts of India: North (New Delhi), South (Chennai), East (Kolkata), and West (Mumbai). These offices help with regional banking needs.
The RBI has 31 branches across India. Most are in capital cities. But there are also branches in Nagpur and Ahmedabad.
The RBI also has three training colleges for its officers. These are in Chennai, Mumbai, and Pune. There are also three special groups that the RBI runs: National Institute of Bank Management (NIBM), Indira Gandhi Institute of Development Research (IGIDR), and Institute for Development and Research in Banking Technology (IDRBT).
RBI's Main Jobs
The RBI, like other central banks, does many important jobs. It manages money, prints currency, handles foreign money, and acts as a bank for the government. It also helps other banks and works for the country's economic growth.
Watching Over Banks
The RBI's main goal is to watch over all banks and financial groups in India. This includes commercial banks and other money companies. It makes sure they follow rules and stay strong.
The RBI checks banks regularly. It also sets rules for how banks should operate. This helps keep people's trust in the banking system. It also protects the money that people deposit. The RBI also has a "Banking Ombudsman Scheme" to help customers with bank complaints.
Managing Payments
The RBI makes sure that payment systems in India work well and are safe. It oversees systems like National Electronic Fund Transfer (NEFT) and Real-Time Gross Settlement (RTGS). These systems allow people and companies to send money from one bank to another within India.
Since December 16, 2019, you can transfer money using NEFT 24 hours a day, every day. RTGS transactions also happen continuously.
Being the Government's Banker
Just like people need a bank, the government also needs one. The RBI acts as the bank for the Government of India. It manages the government's accounts, receives payments, and makes payments. The RBI also helps the government raise money by selling bonds to the public.
Handling Foreign Money
The RBI manages India's foreign money. This helps with international trade and payments. It also helps keep the foreign exchange market stable. The RBI also holds the country's gold reserves.
The RBI can buy or sell foreign money to control its value. This helps reduce big ups and downs in the foreign exchange market.
Printing Money
The Reserve Bank of India is the only group allowed to print banknotes in India. It also destroys old banknotes that are no longer good to use. All the money printed by the RBI is backed by assets of equal value. This helps people trust the paper money.
The RBI has two places that print notes:
- The Security Printing and Minting Corporation of India Limited (SPMCIL) has printing presses in Nashik and Dewas.
- The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), owned by the RBI, has printing places in Mysore and Salboni.
For coins, SPMCIL has four mints in Mumbai, Noida, Kolkata, and Hyderabad. The Government of India mints coins and prints ₹1 notes. The RBI helps distribute and handle them. The RBI also works to stop fake money by adding new security features to notes.
The RBI can print notes up to ₹10,000 and mint coins up to ₹1,000. New ₹500 and ₹2,000 notes were printed in 2016. The old ₹1,000 and old ₹500 notes were stopped in 2016.
On May 19, 2023, the RBI said that the ₹2,000 notes would be taken out of circulation. This is part of the RBI's "Clean Note Policy." It helps keep the currency system efficient.
Being the Banks' Bank
The RBI also acts as a bank for other banks. Commercial banks keep their money accounts with the RBI. The RBI helps banks clear checks and transfer money between them. It can also lend money to banks if they need it urgently. This is why it is called the "lender of last resort."
Finding Fake Money
To fight fake money in India, the RBI has a website: www.paisaboltahai.rbi.org.in. This website teaches people how to spot fake currency.
In 2014, the RBI announced it would take all banknotes issued before 2005 out of circulation. People could exchange these notes at banks. This step helped find "black money" (money kept illegally). New notes have better security features to prevent fakes.
Helping the Economy Grow
The RBI also has a role in helping the country's economy grow. It supports national goals and industries. For example, it encourages banks to lend money to important areas like farming, small businesses, housing, and education. The RBI also works to help small local banks and encourages banks to open branches in rural areas. This helps more people use banking services.
Money Policy Tools
The RBI uses different tools to control the amount of money in the economy. These tools help keep prices stable and support growth.
| Policy rates | |
|---|---|
| Policy repo rate | 6.50% |
| Reverse repo rate | 3.35% |
| Marginal standing facility rate | 6.75% |
| Bank rate | 6.75% |
| Reserve ratios | |
| Cash reserve ratio (CRR) | 4.5% |
| Statutory liquidity ratio (SLR) | 18.00% |
| Lending and deposit rates | |
| Base rate | 8.85%–10.10% |
| Marginal Cost of funds-based overnight Lending Rate (MCLR) | 7.95%–8.35% |
| Savings deposit rate | 2.70%–3.00% |
| Term deposit rate for > 1 year | 6.00%–7.25% |
Repo Rate
The repo rate is the interest rate at which the RBI lends money to other banks for a short time (up to 90 days). If the RBI wants banks to borrow less, it raises the repo rate. This makes borrowing more expensive for banks. If the RBI wants banks to borrow more, it lowers the repo rate. This makes borrowing cheaper.
When the repo rate goes up, banks charge more for loans. This means fewer people borrow money, which can help lower inflation (when prices go up too fast). The RBI does the opposite to fight deflation (when prices go down).
Reverse Repo Rate (RRR)
The reverse repo rate is the opposite of the repo rate. It is the interest rate the RBI pays to banks when they keep their extra money with the RBI. If the RBI wants to take money out of the banking system, it raises the reverse repo rate. Banks then prefer to keep their money with the RBI because it's safe and they earn more interest.
Statutory Liquidity Ratio (SLR)
Banks must keep a certain amount of their money in liquid assets. These include gold, cash, and government securities. This is called the Statutory Liquidity Ratio (SLR). A higher SLR means banks have less money to lend. This can help control inflation. The current SLR is 18.00%.
Cash Reserve Ratio (CRR)
The Cash Reserve Ratio (CRR) is the amount of money banks must keep as cash with the RBI. This helps make sure banks have enough money. The RBI does not pay interest on this money. The current CRR is 4.5%.
If the RBI increases the CRR, banks have less money to lend. This can make loans more expensive and help control inflation.
Open Market Operations (OMO)
The RBI buys and sells government securities in the open market. This helps control the money supply in the banking system. If there is too much money, the RBI sells securities to take money out. If there is not enough money, the RBI buys securities to put money in.
2016 Money Change (Demonetisation)
On November 8, 2016, the Government of India announced that all ₹500 and ₹1,000 banknotes would no longer be valid. The government said this would help fight illegal money and terrorism.
The RBI set up a way for people to exchange their old notes for new ₹500 and ₹2,000 notes.
- People had until December 30, 2016, to deposit their old notes in bank accounts.
- There were limits on how much cash people could take out from banks and ATMs.
- For quick cash, people could exchange a small amount of old notes at banks with an ID.
Some places like petrol stations, hospitals, and railway counters could still accept old notes for a short time.
Problems and Benefits
The change caused a shortage of cash. Many people had to wait in long lines outside banks and ATMs. ATMs often ran out of money. Some people faced difficulties, but there were no serious injuries reported.
However, there were also benefits:
- The country's tax base grew, and more people started paying taxes.
- There was a big increase in digital payments. Even in smaller towns, people started paying for things using digital methods.
Committees by RBI
KV Kamath Committee
In August 2020, the RBI formed a committee led by KV Kamath. This group was asked to suggest ways to help people and businesses pay back loans that were difficult to manage because of COVID-19.
Images for kids
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A 2010 stamp dedicated to the 75th anniversary of the Reserve Bank of India
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Reserve Bank of India-10 Rupees (1938), the first year of banknote issue.
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RBI Monetary Museum in Mumbai was established by the bank under its educational programme in 2004.
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Reserve Bank of India Headquarters Mumbai
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Reserve Bank of India Regional Building is seen from Chennai Suburban Railway Lines
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The regional office of RBI (right) in front of GPO (left) at Dalhousie Square, Kolkata.
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Nagpur branch holds most of India's gold deposits.
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People gathered at ATM of Axis Bank in Mehsana, Gujarat to withdraw cash following deposit of demonetised currency notes in bank on 15 November 2016.
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Queue at a Bank of Baroda's ATM for ₹100 banknotes in Howrah, on 8 November 2016, 22:23 (IST)
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See Also
In Spanish: Banco de la Reserva de la India para niños
- Inflation in India
- Digital rupee
- List of central banks
- List of governors of the Reserve Bank of India
