Reserve Bank of India (RBI): 90 Years and Beyond

GS-3 Mains 

Short Notes or Revision Notes 

Question : Discuss the establishment and pivotal role of the Reserve Bank of India (RBI) in India’s economic development since its inception in 1935 under the RBI Act, 1934.


Establishment and Role

  • Established: April 1, 1935 (RBI Act, 1934)
  • Central Bank of India
  • Plays a pivotal role in India’s economic development

Key Functions

  • Monetary Policy & Inflation Control:
    • Sets repo rate (MIBOR) to influence interest rates and manage inflation.
  • Regulation & Supervision:
    • Oversees commercial banks, NBFCs, and other financial institutions to ensure financial system stability.
  • Foreign Exchange Management:
    • Manages forex reserves, regulates forex market, and maintains exchange rate stability.
  • Financial Inclusion & Innovation:
    • Promotes financial inclusion (e.g., UPI) and fosters financial sector innovation (e.g., digital rupee).


  • Balancing Inflation & Growth:
    • Striking a balance between controlling inflation and promoting economic growth through interest rate adjustments.
  • Regulating the Banking Sector:
    • Addressing non-performing assets (bad loans) in the banking system.
  • Global Economic Uncertainties:
    • Navigating global economic issues like banking fragility and geopolitical tensions.
  • Digital Currency Integration:
    • Ensuring smooth integration of the digital rupee into the Indian economy.
  • Impossible Trinity:
    • Balancing a stable exchange rate, free capital movement, and independent monetary policy.
  • Emerging Technologies:
    • Addressing the impact of new technologies on the financial sector.
  • Economic Disruptions:
    • Responding to events like global financial crisis, demonetization, COVID-19, etc.

Key Initiatives

  • Liquidity Boosting Measures:
    • Cutting repo rate and providing special refinance facilities.
  • Enabling Market Economy:
    • Reforms like IBC and flexible inflation targeting for a stronger banking system and inflation control.
  • Budgetary Initiatives:
    • Supporting measures like privatization, asset monetization, and IBC framework to tackle bad loans.
  • Rupee Stabilization:
    • Steps like export restrictions, fuel tax reductions, and policy rate hikes.


  • The RBI plays a critical role in India’s economic stability and growth.
  • As it enters its 90th year, the RBI must adapt to a changing economic landscape.
  • Challenges include managing digital payments, central bank digital currency, new risks, and effective regulation.
  • Learning from the past and planning for the future will be crucial for the RBI’s journey towards its centenary.


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