Let’s Have a Look at Why RBI is Known as Bankers Bank

Indian currency and banking regulations are handled by the Reserve Bank Of India (RBI), which is the country’s central bank. Here, India produces and mints its currency. Under the Reserve Bank of India Act, which was established on April 1, 1935.

India’s Reserve Bank of India is located in Mumbai, Maharashtra.

As a central bank responsible for establishing, executing and overseeing India’s monetary policy, RBI’s primary goal is to keep the country’s economy under control. Keeping prices stable and ensuring that credit is available to the economy are other important goals for the government. The RBI Act of 1999 mandates that all foreign currency transactions be handled by the bank. As a result, India’s foreign exchange market grows as a result of external trade.

The Role of RBI 

• The basic purpose of the establishment of the Reserve Bank of India was the unification of the authority for the regulation of currency and of credit.

• A supervisor of the all-over financial system.

• Protecting interest rates

• provides positive banking alternatives to the public. 

• The issuer of national currency. 

• Controller of credit

• Custodian of the cash reserves of commercial banks

For India, this means that currency is either printed or destroyed depending on the ongoing situation. This provides the Indian public with a supply of currency in the form of dependable notes and coins, a prominent issue in India.

RBI as Banker to banks, do you know what that means?

Well, as we see, there are several private banks opening up in our localities or regional offices. But these opened accounts are under central surveillance, so only payments from the centre are accepted; only they are maintained by the centre. They are used to settle disputes and interbank obligations regarding issues like cheque transactions. Buying and selling securities. Hence, they are said to be the bankers of banks.

Another famous phrase used is Lender of last resort;

As a Banker to Banks, the Reserve Bank again acts as the ‘lender of the last resort. It can come to the rescue of a bank that is in trouble but faces temporary liquidity problems by supplying it with needed liquidity, that is, currency, when no one else is ready to give credit to that bank. The Reserve Bank extends this facility to protect the interest of the depositors of the bank and to prevent certain failures of the bank, which in turn may also affect other banks and institutions, including the RBI and can have an adverse effect on the financial stability of the country and it would be a great fit for the economy. 

These are a few initiatives taken up by the RBI.

• Providing the best, safe and efficient means of money transfer.

• Enabling banks to keep in close touch with the RBI regarding any requirements.

• Enabling smooth, swift and seamless clearing of interbank obligations.

• to segregate banking from other commercial operations

• building up reserves were made applicable only to non-scheduled banks

Conclusion

We can conclude by saying that as Indian citizens, it is our duty to know about the financial and economic development of the country; RBI is India’s biggest facility that encounters financial deals; from this, we have learned what the role of RBI is and how its working is regarding all the queries and its initiatives, we have also come across a lot of details about how RBI has to maintain every bank under it.