For RBI Grade B Exam Interview
General Questions
Who was the first governor of RBI?
Sir Osborne Smith
What was the nationality of the First Governor of RBI?
Australian
Who was the first Governor of RBI of Indian origin?
Sir C D Deshmukh
First RBI Governor to sign currency notes?
Sir James Taylor
What is a Central Bank?
A central bank is the primary financial authority of a country responsible for issuing currency, regulating monetary policy, and supervising commercial banks.
Overview:
❖ Central Banks or Central Banking emerged as separate institution only after 1900s
❖ Two oldest functions of the “Central Bank” are those of ‘Note Issue’ and ‘Banker to Government’
❖ Slowly acquired other functions such as holding cash reserves of commercial banks, rediscounting their bills and managing clearing houses.
Reserve Bank of India – Brief History
❖ RBI was formed based on the Hilton Young Commission formed in 1925.
❖ Legislation to set up the Reserve Bank of India was first introduced in January 1927.
❖ The enactment was made only in March 1934.
❖ RBI came into existence on April 1, 1935.
1926 – Hilton Young Commission
❖ Strongly recommended for establishment of a central bank
❖ To be called “Reserve Bank of India”
❖ To be entrusted with all central banking functions
❖ Main reason – The inherent weakness of the Indian system was that control of currency and credit was in the hands of two different authorities with no coordination
o Currency by the Government
o Credit by Imperial Bank, if at all
RBI is established
❖ The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
❖ The Central Office of the Reserve Bank was initially established in Kolkata but was permanently moved to Mumbai in 1937.
❖ Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
❖ RBI was established with a capital of Rs. 5 crores.
❖ RBI also served as the Central Bank of Pakistan till June 1948.
❖ RBI was nationalized in 1949.
❖ Burma seceded from Indian Union in 1937. RBI continued to act as the Central Bank for Burma till 1947
RBI Preamble
"to regulate the issue of Bank notes and
keeping of reserves
with a view to securing monetary stability in India and
generally to operate the currency and credit system of the country to its advantage;
to have a modern monetary policy framework to meet the challenge of an increasingly complex economy,
to maintain price stability while keeping in mind the objective of growth."
The portion in Red was added as per amendment to RBI Act in 2016. The amended act also included that the monetary policy framework in India shall be operated by the Reserve Bank of India.
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