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Himanshu Kulshreshtha
Himanshu KulshreshthaElite Author
Asked: May 14, 20242024-05-14T14:23:15+05:30 2024-05-14T14:23:15+05:30In: Co-operation, Co-operative Law and Business Laws

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

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

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    1. Himanshu Kulshreshtha Elite Author
      2024-05-14T14:23:45+05:30Added an answer on May 14, 2024 at 2:23 pm

      The Reserve Bank of India Act, 1934, is the primary legislation governing the functions, powers, and operations of the Reserve Bank of India (RBI), India's central bank. It provides a legal framework for the establishment, organization, and regulation of the RBI, as well as its roles in monetary policy, currency management, banking regulation, and financial stability. Here are the salient features of the Reserve Bank of India Act, 1934:

      1. Establishment and Constitution of RBI:

      • The Act provides for the establishment of the Reserve Bank of India as the central banking institution of India.
      • It specifies the composition of the central board of directors, including the Governor, Deputy Governors, and other directors appointed by the central government.

      2. Monetary Policy Framework:

      • The Act empowers the RBI to formulate and implement monetary policy in India to maintain price stability and promote economic growth.
      • It outlines the objectives, instruments, and procedures for conducting monetary policy operations, including open market operations, repo rate adjustments, and reserve requirements.

      3. Currency Management:

      • The Act vests the RBI with the sole authority to issue currency notes and coins in India.
      • It regulates the circulation and supply of currency, manages the currency reserve, and oversees the printing and minting of currency by the government.

      4. Banking Regulation and Supervision:

      • The RBI Act grants the RBI extensive regulatory and supervisory powers over banks and financial institutions operating in India.
      • It prescribes licensing requirements, prudential norms, and regulatory standards to ensure the stability, soundness, and integrity of the banking system.

      5. Foreign Exchange Management:

      • The Act authorizes the RBI to regulate foreign exchange transactions and oversee the foreign exchange market in India.
      • It governs foreign exchange reserves, controls capital flows, and formulates policies to manage exchange rate volatility and external sector stability.

      6. Reserve Requirements:

      • The RBI Act empowers the RBI to impose reserve requirements, such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), on banks to control credit expansion and liquidity in the economy.
      • It outlines the calculation, maintenance, and reporting requirements for reserve ratios to ensure financial stability and liquidity management.

      7. Financial Stability and Crisis Management:

      • The Act mandates the RBI to monitor, assess, and address systemic risks and vulnerabilities in the financial system.
      • It provides the RBI with emergency powers to intervene in distressed financial institutions, implement resolution measures, and safeguard depositor interests during crises.

      8. Legal Framework and Enforcement:

      • The RBI Act establishes a legal framework for the functioning of the RBI and confers legal immunity and protection on the institution and its officials.
      • It specifies the powers of inspection, investigation, and enforcement available to the RBI to enforce compliance with banking laws and regulations.

      In summary, the Reserve Bank of India Act, 1934, forms the cornerstone of India's monetary and financial system, providing the legal basis for the functioning, powers, and responsibilities of the RBI. Its salient features encompass the central bank's roles in monetary policy, currency management, banking regulation, and financial stability, thereby ensuring the effective and efficient operation of the Indian economy.

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