Organisation and Functions of the Reserve Bank of India (RBI): Structure, Mandate & Governance

The Reserve Bank of India (RBI) is the nation’s central bank and the backbone of India’s financial and monetary system. Established in 1935, it plays a pivotal role in ensuring monetary stability, supervising financial institutions, regulating the currency system, and promoting overall economic growth. For competitive exam aspirants, the organisational structure, governance framework, and core functions of RBI are among the most frequently tested topics in banking, economy, and polity sections.

This article presents a comprehensive, easy-to-read, and exam-focused overview of the RBI’s organisation and functions, including its establishment, Central Board composition, legal authority, subsidiary institutions, departments, and key responsibilities.

Establishment of the Reserve Bank of India

The RBI was established on April 1, 1935 under the Reserve Bank of India Act, 1934. Initially headquartered in Kolkata, the Central Office was shifted permanently to Mumbai in 1937, where policy-making now takes place.

Originally a privately owned institution, the RBI was nationalised in 1949, bringing it fully under the ownership of the Government of India.

RBI’s Preamble: Mandate and Purpose

The Preamble of the RBI Act defines the central bank’s overarching purpose,

• Regulate the issue of banknotes and maintain reserves to ensure monetary stability
• Operate the currency and credit system to the nation’s advantage
• Ensure a modern monetary policy framework
• Maintain price stability while supporting growth
• The Preamble reflects RBI’s dual role—maintaining stability and facilitating economic development.

Governance Structure: The Central Board of Directors

The RBI’s affairs are governed by the Central Board of Directors, appointed by the Government of India under the RBI Act, 1934. Members hold office for four years.

Composition of the Central Board

1. Official Directors

• Governor
• Up to four Deputy Governors

2. Non-Official Directors

• Ten directors nominated by the Government from various fields
• Two Government officials
• Four directors representing the Local Boards (one each from Northern, Southern, Eastern, and Western areas)

Current Central Board Members (as per RBI Act Sections)

Section 8(1)(a) – Full-time Directors,

• Shri Sanjay Malhotra – Governor
• Shri T. Rabi Sankar – Deputy Governor
• Shri Swaminathan J – Deputy Governor
• Dr. Poonam Gupta – Deputy Governor
• Shri Shirish Chandra Murmu – Deputy Governor

Section 8(1)(b) – Nominated Members

• 6. Ms. Revathy Iyer
• 7. Prof. Sachin Chaturvedi

Section 8(1)(c) – Other Directors

• 8. Shri Satish Kashinath Marathe
• 9. Shri Swaminathan Gurumurthy
• 10. Shri Anand Gopal Mahindra
• 11. Shri Venu Srinivasan
• 12. Shri Pankaj Ramanbhai Patel
• 13. Dr. Ravindra H. Dholakia

Section 8(1)(d) – Government Officials

• 14. Shri Nagaraju Maddirala
• 15. Ms. Anuradha Thakur

The Central Board exercises general superintendence and direction over RBI’s affairs.

Local Boards of the RBI

RBI maintains four Local Boards for,

• Western Area
• Eastern Area
• Northern Area
• Southern Area

Each board comprises five members appointed for four years, advising the Central Board on,

• Regional banking issues
• Local cooperative institutions
• Indigenous banking practices

Note: Currently, Local Boards are non-functional due to lack of quorum (as of November 4, 2022). A Standing Committee of the Central Board operates in their place.

Sitting Fees and Allowances

RBI compensates directors for attending meetings,

• Central Board Meeting: ₹60,000 sitting fee
• Local Board Meeting: ₹60,000
• Committee of the Central Board (CCB): ₹30,000
• Halting allowance: ₹3,750 per day

Travel and stay expenses covered by RBI

Board for Financial Supervision (BFS)

Established in November 1994, the BFS is an apex supervisory body under the Central Board. Its responsibilities include,

• Strengthening supervision of banks and financial institutions
• Integrating oversight of commercial banks, NBFCs, and financial intermediaries
• Formulating supervisory policies

The Department of Supervision provides secretarial support to BFS.

RBI’s Legal Framework

I. Acts Administered by RBI

• Reserve Bank of India Act, 1934
• Banking Regulation Act, 1949
• FEMA, 1999
• Government Securities Act, 2006
• Securitisation (SARFAESI) Act, 2002 (Chapter II)
• Payment and Settlement Systems Act, 2007
• Credit Information Companies Act, 2005
• Factoring Regulation Act, 2011

II. Other Relevant Acts

• Negotiable Instruments Act, 1881
• Companies Act, 2013
• DICGC Act, 1961
• NABARD Act, 1981
• RRB Act, 1976
• Competition Act, 2002
• Indian Coinage Act, 2011

and several others tied to banking, coinage, securities, and reconstructions.

Main Functions of the RBI

1. Monetary Authority

• Formulates and implements monetary policy
• Maintains price stability while supporting economic growth

2. Regulator & Supervisor of the Financial System

• Prescribes parameters for banking operations
• Protects depositors’ interests
• Ensures financial stability and efficiency

3. Manager of Foreign Exchange

• Administers FEMA 1999
• Promotes orderly development of the foreign exchange market

4. Issuer of Currency

• Issues and manages banknotes
• Ensures adequate and high-quality currency supply

5. Developmental Role

• Promotes financial inclusion
• Supports national development priorities

6. Regulator of Payment and Settlement Systems

• Ensures safe, secure and efficient digital and physical payment systems

Related Banking Functions

• Banker to the Government—manages accounts and public debt
• Banker to Banks—maintains accounts of scheduled banks

Offices and Training Establishments

RBI Offices

RBI operates from 34 regional offices and branches across India.

Training Establishments

RBI runs five major training centres, including,

• RBI Academy
• College of Agricultural Banking
• Reserve Bank Staff College
• College of Supervisors
• IDRBT (autonomous, funded by RBI)

Institutes Funded by RBI

CAFRAL – Research & training in financial sector (fully funded)

IGIDR – Research institute focusing on development and public policy

IIBM – Sponsored by RBI and other financial institutions

NIBM – Apex institution for banking management

RBI’s Subsidiaries

The RBI fully owns the following major institutions,

• Deposit Insurance and Credit Guarantee Corporation (DICGC)
• Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL)
• Reserve Bank Information Technology Pvt. Ltd. (ReBIT)
• Indian Financial Technology and Allied Services (IFTAS)
• Reserve Bank Innovation Hub (RBIH)

These subsidiaries strengthen India’s currency management, cybersecurity framework, payment infrastructure, and financial innovation ecosystem.