Answers:
The
Reserve Bank of India Act of 1934 has handed over all the important functions of
a central bank to the Reserve Bank of India.
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Bank of Issue
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Under Section 22 of
the Reserve Bank of India Act, the RBI has the sole right to issue bank notes
of all denominations. The distribution of one rupee notes and coins and small
coins all over the country is undertaken by the Reserve Bank as agent of the
government
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Banker to the Government
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The second important
function of the Reserve Bank of India is to act as Government banker, agent
and adviser. The Reserve Bank is agent of Central Government and of all State
Governments in India excepting that of Jammu and Kashmir.
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Bankers' Bank and Lender of the Last
Resort
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The Reserve Bank of
India acts as the bankers' bank. According to the provisions of the Banking
Companies Act of 1949, every scheduled bank was required to maintain with the
Reserve Bank a cash balance equivalent to 5 per cent of its demand
liabilities and 2 per cent of its time liabilities in India.
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Controller of Credit
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The Reserve Bank of
India (RBI) acts as the controller of credit. This implies that the RBI has
the power to manipulate the volume of credit created by banks in India. This
can be done by changing the Bank rate or by means of open market operations.
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Custodian of Foreign Exchange
Reserves
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The Reserve Bank of
India has the responsibility to maintain the official rate of exchange.
According to the Reserve Bank of India Act to 1934, the Bank was required to
buy and sell at fixed rates any amount of sterling in lots of not less than
10,000.
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