Functions of RBI:
(1) Issue of Banks notes of all denominations except one rupee coin.
(2) Bankers, agent and advisor of the government.
(3) The Central Bank is a banker to all the other banks. As the supreme bank it performs various functions:
(a) Custodian of cash reserve of the bank.
(b) Lender of the last resort.
(c) Clearing agent
(4) As a central bank, the RBI take the responsibility to control of credit in order to economic development and price stability.
(5) The RBI act as a custodian of gold and foreign exchange reserves for both on its own and on behalf of the Government.
(6) Supervision and promotions of sound banking system in India.
Some of the important functions of RBI are detailed below:
(1) Note Issue: The reserves bank of India is the sole authority for the issue of currency in India other than one rupee coins/notes and subsidiary coins. The RBI has adopted the minimum reserves system of note issue to issue currency notes in the country.
Under this system the RBI maintains a minimum reserve of Rs. 200 crore of which Rs. 115 crore is in gold and the rest in securities. The issue department of RBI has the responsibility to issue paper money; the issue of currency into circulation and its withdrawal from circulation take place through the banking department of the Bank.
(2) Bankers to Government:- The RBI acts as banker to the Central and State Government as a bankers as a adviser as a agent into there capacities :-
(a) As a bankers.
(b) As an agent.
(c) As an advisor.
As a Government banker the RBI performs the following functions:-
(a) It maintains and operates deposit account of the central and state governments.
(b) It receives and collects payment on behalf of the Central and state governments.
(c) It makes payments on behalf of the central and state governments.
(d) It provides short term advances to government for which are called ways and means advances etc.
As a Government agent the RBI perform the followings functions:-
(a) Collect tax and other payments on behalf of the government.
(b) Raise loan from the public and thus manages public debts.
(c) Transfer funds and provide remittances facilities to the government etc.
As an adviser the RBI acts as an advising the Government on all financial matters such as loan separations investment, agricultural and industrial finance, banking planning etc. It also advices to promote the attainment of the national economic goals.
