The main functions of the Reserve Bank of India can be classified under the following heads:
1. Bank issue: according to the section 22 of the reserve bank of India act, only the reserve bank of India has the right to issue bank notes of all types of denominations.RBI also has the right of distribution of small coins and other coins and of one rupee notes all over the country.
2. Monetary authority: being the main monetary authority of the country reserve bank of India acts as the bank of the state and national governments. It formulates monitors and implements the monetary policy as well as ensures proper flow of credit into the productive sectors.
3. Supervising and regulating of the financial system: reserve bank of India also regulates and supervises the financial system of the country as well as prescribes parameters of operations of banking. It helps in maintaining confidence of the public in the system and in providing banking service in a cost effective way to the public. It also looks after the interest of the depositors.
4. Issue of currency: Reserve bank of India is solely responsible for issuing, exchanging or destroying of currency notes and coins which are considered to be unfit for circulation. This function of RBI helps in proper supply of good quality currency for the public. It also provides loans to the commercial banks for the improvement of GDP.
5. Manager of foreign Exchange: Reserve Bank of India manages the foreign exchange management act, 1999, in order to facilitate external trade. It also takes care of the payment and promotion of orderly development and maintenance of foreign exchange market in India.
6. Banker of Banks: Reserve Bank of India is known as the banker of banks as it works as a central bank where other commercial banks can deposit their money and create an account. RBI holds account of scheduled banks. It also controls credit by means of bank rate, CRR and open market operations.
Apart from these main functions there are many related functions that reserve bank of India has to perform. Following are the list of some such functions of reserve bank of India.
· RBI fights against the economic crisis and ensures price and economic stability in the country.
· It promotes the banking habit and there by helps in expansion of banking systems.
· Provides extension of facilities for the small scale industries
· Provides help for the proper functioning of the co-operative sector
Under supervisory functions it performs the following tasks:
· Grants license to the banks
· Makes enquiries and inspects matters under various sections of RBI and banking regulation act
· Implements deposit of insurance scheme and many such functions.