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Discuss the main functions of Reserve Bank of India as central Bank.

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Functions of Reserve Bank of India 

(1) Issue of Notes : The Reserve Bank has the monopoly of note issue in the country. It has the sole right to issue currency notes of various denominations except one rupee note. The Reserve Bank acts as the only source of legal tender money because the one rupee note issued by Ministry of Finance are also circulated Through it. The Reserve bank has adopted the Minimum Reserve system for the note issue since 1957, it maintains gold and foreign exchange reserves of Rs. 200 crore, of which at least Rs. 115 crore be in gold. 

(2) Banker to the Government : The second important function of the Reserve Bank is to act as the banker, Agent and Adviser to the Government. It performs all the banking functions of the state and central Government on matters related to economic and monetary policy. It also manages the public debt for the government.

(3) Banker’s Bank : The Reserve Bank Performs the same function for the other banks as the other banks ordinarily perform for their customers. It is not only a banker to the commercial banks, but it is the lender of the last resort. 

(4) Controller of credit : The Reserve Bank undertake the responsibility of controlling credit created by the commercial banks. To achieve this objective it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country. 

(5) Custodian of Foreign Reserves : For the purpose of keeping the foreign exchange rates stable the Reserve Bank buys and sells the foreign currencies and also protects the country’s foreign exchange funds. 

(6) Other Functions : The bank performs a number of other development works. These works include the function of clearing house arranging credit for agriculture, ( which has been transferred to NABARD) collecting and Publishing the economic data, buying and selling of Government securities and trade bills, giving loans to the Government buying and selling of valuable commodities etc. it also acts as the representative of Government in I.M.F. and represents the membership of India.

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