RBI as Regulator

WHAT IS RBI ?

The Reserve Bank of India (RBI) is the central bank of India, which was established on 1st April , 1935 under the Reserve Bank of India Act to oversee the development and working of overall financial system of country. It acts as a regulator and supervisor of the overall financial system.

The Reserve Bank of India (RBI) has been playing an important role in the economy of the country both in its regulatory and promotional aspects.

REGULATORY FUNCTIONS PERFORMED BY RBI

The following are some of the regulatory and promotional functions performed by the RBI –

  • Issuing licenses to banks wishing to conduct business in India or open new branches.
  • Governing foreign banks entry and expansion and approval of Indian banks to operate overseas,
  • Policy formulation, review and implementation on Prudential Norms, Basel – II and III frameworks, validation of quantitative models on Credit, Market and Operational Risks, Stress testing,
  • International Financial Reporting Standards (IFRS), Securitisation, Resolution mechanism, etc.
  • Monitoring maintenance of SLR and CRR by banks,
  • Approving the appointments of Whole Time Directors & Part-Time Chairperson of Private Sector Banks and Chief Executive Officers of foreign banks operating in India, and their compensation packages.
  • Overseeing the amalgamation, reconstruction and liquidation of banking companies,
  • Policy issues relating to customer service,Anti-Money Laundering and Combating Financing of Terrorism and issuing of instructions regarding KYC
  • Regulation of financial institutions.
  • Issuing directives to non-banking financial institutions that are not influenced by monetary policy.
  • Inspect and supervise banks

In addition to the above functions, RBI also acts as the regulator & supervisor of the overall financial system of the country & prescribes broad parameters of banking operations within which the country’s banking and financial system functions.

 

Thus, in this way RBI serves as the country’s central bank and primary financial regulator &  is responsible for regulating India’s financial markets and maintaining economic stability.

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