The Reserve Bank of India (RBI) is the most asked institution in banking awareness. Questions range from “when was RBI set up” to “which section of the RBI Act deals with the MPC”. This guide covers it all in a structured way.
RBI at a glance
| Fact | Detail |
|---|---|
| Recommended by | Hilton Young Commission (Royal Commission on Indian Currency and Finance, 1926) |
| Law | Reserve Bank of India Act, 1934 |
| Established | 1 April 1935 |
| First headquarters | Kolkata (Calcutta); moved to Mumbai in 1937 |
| Nationalised | 1 January 1949 (under the RBI (Transfer to Public Ownership) Act, 1948) |
| First Governor | Sir Osborne Smith (1935–37) |
| First Indian Governor | C.D. Deshmukh (1943–49) |
| Current Governor | Sanjay Malhotra (26th Governor, since 11 December 2024) |
| Emblem | Tiger and palm tree |
| Financial year | April–March (from 2020-21; earlier July–June) |
| Celebrated | 90 years in 2025 (RBI@90) |
Structure: who runs RBI?
The RBI’s affairs are run by a Central Board of Directors appointed by the Government of India under Section 8 of the RBI Act.
| Members | Number |
|---|---|
| Governor | 1 |
| Deputy Governors | Up to 4 |
| Directors nominated from the four Local Boards | 4 |
| Directors nominated by the government (experts from various fields) | 10 |
| Government officials | 2 |
| Total | 21 |
- Local Boards: four, for the Western (Mumbai), Eastern (Kolkata), Northern (New Delhi) and Southern (Chennai) areas.
- The Governor and Deputy Governors hold office for up to 5 years and can be reappointed.
- The Board for Financial Supervision (BFS) (1994) supervises banks and NBFCs under the Central Board.
Main functions of RBI
| Function | What it means |
|---|---|
| Monetary authority | Frames and runs monetary policy (repo rate via the MPC) to keep inflation at 4% ±2% |
| Issuer of currency | Sole right to issue banknotes (Section 22). The ₹1 note and coins are issued by the Government of India; RBI only distributes coins |
| Banker to the government | Manages the accounts and public debt of the Centre and the states |
| Banker’s bank | Holds banks’ CRR, lends to them (repo, MSF) and acts as lender of last resort |
| Regulator and supervisor | Licenses and regulates banks, NBFCs, co-operative banks (with NABARD for RRBs and rural co-ops) |
| Manager of foreign exchange | Manages forex reserves and the rupee under FEMA, 1999 |
| Payment systems | Regulates payment systems under the Payment and Settlement Systems Act, 2007 |
| Developmental role | Financial inclusion, priority sector lending, financial literacy |
Currency management facts
| Fact | Detail |
|---|---|
| Note-issue system | Minimum Reserve System since 1957: ₹200 crore minimum, of which ₹115 crore in gold |
| Highest note ever | ₹10,000 (issued 1938 and 1954; demonetised 1946 and 1978) |
| Maximum allowed by law | ₹10,000 (Section 24) |
| Note presses (Govt, SPMCIL) | Nashik and Dewas |
| Note presses (RBI, BRBNMPL) | Mysuru and Salboni |
| Coin mints (Govt) | Mumbai, Hyderabad, Kolkata, Noida |
| Signature on ₹1 note | Finance Secretary; all other notes carry the RBI Governor’s signature |
Important sections of the RBI Act, 1934
| Section | Subject |
|---|---|
| 7 | Government can give directions to RBI in public interest |
| 8 | Composition of the Central Board |
| 17 | Business RBI may carry out (including SDF since 2018) |
| 22 | Sole right to issue banknotes |
| 24 | Denominations of notes |
| 26 | Legal tender character of notes |
| 42 | CRR; Second Schedule (scheduled banks) |
| 45-IA | Registration of NBFCs |
| 45ZB | Monetary Policy Committee |
RBI subsidiaries
| Subsidiary | Role |
|---|---|
| DICGC | Deposit insurance (₹5 lakh per depositor per bank) |
| BRBNMPL | Prints banknotes (Mysuru, Salboni) |
| ReBIT | Reserve Bank Information Technology (cyber security, IT) |
| IFTAS | Indian Financial Technology and Allied Services (runs SFMS, banking cloud) |
| RBIH | Reserve Bank Innovation Hub, Bengaluru (fintech innovation) |
NABARD (1982), NHB (1988) and the former UTI were once linked to RBI, but RBI has since divested its stake in NABARD and NHB.
Customer grievances
- The RBI Integrated Ombudsman Scheme, 2021 (launched 12 November 2021) follows “One Nation One Ombudsman“. It covers banks, NBFCs, payment system participants and credit information companies.
- Complaints can be filed at cms.rbi.org.in.
Exam-ready one-liners
- RBI was set up on 1 April 1935 on the Hilton Young Commission’s recommendation.
- RBI’s headquarters moved from Kolkata to Mumbai in 1937.
- RBI was nationalised on 1 January 1949.
- First Governor: Sir Osborne Smith; first Indian Governor: C.D. Deshmukh.
- Sanjay Malhotra is the 26th Governor (since December 2024).
- The Central Board has 21 members; there are 4 Local Boards.
- The ₹1 note is issued by the Government of India, not RBI.
- RBI has followed the Minimum Reserve System of note issue since 1957.
Related reading
- All 26 RBI Governors with tenure
- Repo, reverse repo, CRR and SLR explained
- Monetary Policy Committee explained
- Deposit insurance (DICGC) explained
Quiz: test yourself
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Based on the RBI Act, 1934 and RBI publications as reported. Check rbi.org.in for the latest.
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