Discuss in detail salient features of Reserve Bank of India, Act, 1934.

The Reserve Bank of India Act, 1934, serves as the legislative framework that governs the functions, powers, and operations of the Reserve Bank of India (RBI), the central banking institution of India. This Act is crucial for the functioning of the Indian financial system and encompasses several salient features:

1. Establishment and Constitution: The Act formally establishes the Reserve Bank of India as the central bank of the country. It outlines the composition and structure of the RBI, including the appointment and tenure of its Governor and Deputy Governors, as well as the constitution of its Central Board of Directors.

2. Monetary Policy Authority: One of the primary functions of the RBI is to formulate and implement monetary policy. The Act empowers the RBI to regulate the monetary and credit system of the country, including the issuance and circulation of currency, control of credit, and interest rate management, to achieve broader economic objectives such as price stability and economic growth.

3. Banking Regulation and Supervision: The RBI Act grants the central bank extensive powers to regulate and supervise the banking sector in India. This includes licensing and regulation of banks, setting prudential norms, conducting inspections and audits, and taking corrective actions to maintain the stability and integrity of the banking system.

4. Currency Management: The Act entrusts the RBI with the responsibility for issuing and managing the currency in India. It empowers the RBI to issue banknotes and coins, regulate the circulation and exchange of currency, and maintain the integrity and security of the currency supply.

5. Foreign Exchange Management: The RBI Act provides the RBI with authority over foreign exchange management in India. It empowers the RBI to regulate foreign exchange transactions, control capital flows, manage foreign exchange reserves, and formulate policies to stabilize the external value of the Indian rupee.

6. Reserve Requirements: The Act grants the RBI the power to prescribe reserve requirements for banks operating in India. This includes cash reserve ratio (CRR) and statutory liquidity ratio (SLR), which banks are required to maintain with the RBI as a percentage of their deposits and investments, respectively.

7. Banker to the Government: The RBI Act designates the RBI as the banker, agent, and advisor to the Government of India and state governments in matters related to banking and finance. The RBI manages government accounts, facilitates government borrowing, and acts as the custodian of government securities.

8. Powers and Privileges: The Act confers various powers and privileges upon the RBI to carry out its functions effectively. This includes the authority to issue regulations, conduct investigations, impose penalties, and enjoy legal immunities in the exercise of its duties.

Overall, the Reserve Bank of India Act, 1934, provides the legal foundation for the functioning of the RBI and delineates its roles, powers, and responsibilities in maintaining monetary stability, regulating the financial system, and fostering economic development in India.