Reserve Bank of India (RBI): History, Functions, Structure, Governor and Subsidiaries
The Reserve Bank of India (RBI) is India’s central bank and one of the most important institutions in the country’s financial system. It plays a major role in maintaining monetary and financial stability, regulating banks and certain financial institutions, managing currency, overseeing payment systems, and managing India’s foreign exchange reserves.
For students preparing for SSC, Banking, Railway, UPSC, State PSC and other competitive examinations, RBI is an important topic under Banking Awareness and General Awareness.
The Reserve Bank of India was established on April 1, 1935, under the Reserve Bank of India Act, 1934. Its Central Office was initially established in Calcutta (now Kolkata) and was permanently moved to Mumbai in 1937. RBI was originally privately owned but was nationalised on January 1, 1949, after which it became fully owned by the Government of India.
History of the Reserve Bank of India
The idea of establishing a central bank for India developed during the British period. The Royal Commission on Indian Currency and Finance, popularly known as the Hilton Young Commission, played an important role in recommending the establishment of a central bank.
The commission was appointed in the 1920s to examine India’s currency and financial system. In 1926, it recommended the creation of a central bank. A bill based on the recommendation was introduced in the Legislative Assembly in 1927, but it was subsequently withdrawn because of disagreements among different sections.
The recommendations eventually contributed to the establishment of the Reserve Bank of India under the RBI Act, 1934.
Important Dates in RBI History
- 1926: Hilton Young Commission recommended the establishment of a central bank.
- 1927: A bill relating to the proposed central bank was introduced.
- 1934: Reserve Bank of India Act was passed.
- April 1, 1935: RBI started operations.
- 1937: Central Office permanently shifted from Calcutta to Mumbai.
- January 1, 1949: RBI was nationalised.
Objective of RBI
The original statutory objective of the Reserve Bank of India is connected with the regulation of banknotes and maintenance of reserves to secure monetary stability.
In simple terms, the RBI’s broad objective is to maintain monetary and financial stability while ensuring that the country’s financial system functions smoothly.
The RBI therefore performs several interconnected responsibilities, including monetary policy, banking regulation, currency management, foreign exchange management and payment-system regulation.
RBI Central Board of Directors
The affairs and management of the Reserve Bank of India are entrusted to the Central Board of Directors. The Central Board is constituted by the Central Government under the provisions of the Reserve Bank of India Act, 1934.
The Central Board is responsible for the general superintendence and direction of the affairs and business of the Reserve Bank.
The statutory structure of the Central Board can include up to 21 members, broadly comprising:
- The Governor
- Up to four Deputy Governors
- Directors nominated by the Central Government
- Government officials nominated by the Central Government
- Four directors, one from each of the four Local Boards
The exact composition can change as appointments and nominations are made by the Government.
RBI Governor
The Governor is the highest executive authority of the Reserve Bank of India and serves as the Chairperson of the Central Board.
A common examination point is that the Governor is appointed by the Government of India. Under Section 8 of the RBI Act, the Governor and Deputy Governors hold office for a term specified by the Central Government, which cannot exceed five years, and they may be reappointed.
Current RBI Governor
As of August 2026, Shri Sanjay Malhotra is the 26th Governor of the Reserve Bank of India. He took charge on December 11, 2024, for a period of three years.
This is an important update because older study materials often mention Shaktikanta Das as the 25th Governor. Shaktikanta Das served as Governor before Sanjay Malhotra and completed his tenure in December 2024.
Deputy Governors of RBI
The Reserve Bank can have four Deputy Governors. They are appointed by the Central Government and assist the Governor in managing different areas of the Reserve Bank’s work.
Their responsibilities may include banking regulation, monetary policy-related operations, financial markets, currency management, payment systems, information technology, foreign exchange and other important areas.
Because Deputy Governor appointments can change, competitive-exam students should always verify the names from the latest RBI notification or official RBI website before an examination.
Local Boards of RBI
The Reserve Bank has four Local Boards representing different geographical areas of India:
- Western Area – Mumbai
- Eastern Area – Kolkata
- Northern Area – New Delhi
- Southern Area – Chennai
Each Local Board consists of five members appointed by the Central Government. Members generally hold office for a term of four years.
The Local Boards advise the Central Board on matters referred to them and represent territorial and economic interests, including the interests of cooperative and indigenous banks. They can also perform duties delegated to them by the Central Board.
Major Functions of the Reserve Bank of India
The functions of RBI are extensive. Its role goes far beyond printing currency. The Reserve Bank is the country’s central monetary authority and an important regulator and supervisor of the financial system.
1. Monetary Authority
The RBI is India’s main monetary authority. It formulates, implements and monitors monetary policy.
Monetary policy aims to maintain price stability while keeping in mind the objective of growth. Through monetary policy instruments and liquidity management, RBI influences interest rates, money supply and overall financial conditions.
2. Regulator and Supervisor of Banks
RBI regulates and supervises banks and several other financial institutions. It establishes regulatory and prudential frameworks within which the banking system operates.
The objective is to promote a safe, sound and stable financial system and protect the interests of depositors.
3. Currency Management
The Reserve Bank is responsible for managing the country’s currency system.
It has the sole right to issue banknotes in India, except for ₹1 notes, which are issued by the Government of India. Coins are minted by the Government and are put into circulation through the RBI.
RBI also manages the distribution of banknotes and coins and withdraws damaged or unfit notes from circulation.
4. Banker to the Government
The Reserve Bank acts as a banker to the Central Government and State Governments.
It performs banking and merchant banking functions for governments and manages several aspects of government banking transactions.
5. Banker to Banks
RBI maintains banking accounts of scheduled banks and provides important banking facilities to the banking system.
As the central bank, RBI also manages liquidity in the banking system and provides various facilities to eligible financial institutions.
6. Foreign Exchange Management
The Reserve Bank manages India’s foreign exchange reserves and administers the country’s foreign exchange framework under the applicable law.
Its foreign exchange management role helps maintain orderly conditions in the foreign exchange market and supports external financial stability.
7. Regulation of Payment and Settlement Systems
RBI regulates and develops payment and settlement systems in India. This includes supporting safe, efficient and reliable payment mechanisms.
The objective is to maintain public confidence in payment systems and ensure that financial transactions can be completed efficiently.
8. Financial Stability
Another important responsibility of RBI is to contribute to the stability of India’s financial system.
It monitors developments in banks and financial institutions, introduces regulatory measures when required and works to strengthen the resilience of the financial system.
9. Developmental Role
RBI also performs developmental functions. These include supporting financial inclusion, improving banking infrastructure, encouraging efficient payment systems and promoting the development of financial markets.
Currency Printing and RBI
An important point for competitive examinations is that RBI does not itself own all currency presses in India.
Two currency presses are owned through Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), an RBI-owned company. These presses are located at:
- Mysuru, Karnataka
- Salboni, West Bengal
The other two currency presses are operated by Security Printing and Minting Corporation of India Limited (SPMCIL) at Nashik and Dewas. Coins are minted at four Government mints located at Mumbai, Hyderabad, Kolkata and Noida.
RBI Subsidiaries and Related Institutions
Older study material frequently describes NABARD and NHB as RBI subsidiaries. This information needs to be updated.
NABARD
The National Bank for Agriculture and Rural Development (NABARD) was established on July 12, 1982.
It is an apex development financial institution focused on agriculture and rural development. Its activities include supporting credit and development in agriculture, rural industries, rural infrastructure and related sectors.
NABARD also plays an important supervisory role for Regional Rural Banks and cooperative banks.
However, NABARD is no longer an RBI subsidiary. The Government of India acquired RBI’s entire stake in NABARD in 2019.
Therefore, it is incorrect to list NABARD as a current RBI subsidiary.
National Housing Bank (NHB)
The National Housing Bank (NHB) was established on July 9, 1988, under the National Housing Bank Act, 1987.
NHB was established to promote a sound and efficient housing finance system in India and support the development of housing finance institutions.
Like NABARD, NHB is no longer an RBI subsidiary. RBI’s stake in NHB was transferred to the Government of India in 2019.
Another important update is that the regulatory authority over Housing Finance Companies (HFCs) was transferred from NHB to RBI in 2019. HFCs are now regulated within the RBI’s regulatory framework.
Thus, older notes stating that NHB currently regulates HFCs should be updated.
Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
BRBNMPL is an important RBI-owned institution involved in banknote production.
It was established by RBI in February 1995 as a wholly owned subsidiary to increase banknote production and help bridge the gap between the demand and supply of banknotes.
BRBNMPL operates two currency presses:
- Mysuru, Karnataka
- Salboni, West Bengal
The company therefore plays an important role in India’s currency management infrastructure.
Deposit Insurance and Credit Guarantee Corporation (DICGC)
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly owned subsidiary of the Reserve Bank of India.
DICGC was established under the DICGC Act, 1961. The present corporation came into existence on July 15, 1978, following the merger of the Deposit Insurance Corporation and the Credit Guarantee Corporation of India.
Its main purpose is to provide deposit insurance and protect eligible bank depositors.
DICGC coverage applies to eligible commercial and cooperative banks registered with DICGC. The deposit insurance system is mandatory for banks licensed by RBI that fall within the applicable framework.
Deposit Insurance Limit
The current deposit insurance limit is:
₹5 lakh per depositor per bank
This limit includes both principal and interest and applies to deposits held in the same right and same capacity. The ₹5 lakh limit has been applicable since February 4, 2020.
Covered deposits include common deposit types such as:
- Savings deposits
- Fixed deposits
- Current deposits
- Recurring deposits
Certain categories of deposits are excluded under the DICGC framework, including specified government deposits, inter-bank deposits and certain deposits received outside India.
An important point is that the depositor does not separately pay the deposit insurance premium. The premium is paid by the insured bank to DICGC.
Important Updates for Competitive Exams
Students should be careful when using older RBI notes because several facts change over time.
Current facts to remember
| Topic | Updated Information |
|---|---|
| RBI established | April 1, 1935 |
| RBI Act | Reserve Bank of India Act, 1934 |
| Initial Central Office | Calcutta |
| Central Office shifted permanently | Mumbai, 1937 |
| RBI nationalised | January 1, 1949 |
| RBI headquarters/Central Office | Mumbai |
| Current Governor | Sanjay Malhotra |
| Current Governor number | 26th |
| Sanjay Malhotra took charge | December 11, 2024 |
| RBI currency-note exception | ₹1 note issued by Government of India |
| DICGC insurance limit | ₹5 lakh per depositor per bank |
| NABARD | Not an RBI subsidiary now |
| NHB | Not an RBI subsidiary now |
| HFC regulator | RBI |
| BRBNMPL presses | Mysuru and Salboni |
The current Governor information is particularly important because Shaktikanta Das is no longer the RBI Governor. RBI’s official Governors list identifies Sanjay Malhotra as the 26th Governor from December 11, 2024 onwards.
Why RBI Is Important for the Indian Economy
The Reserve Bank of India occupies a central position in India’s economic and financial system. Decisions taken by RBI can influence interest rates, credit availability, inflation, liquidity, foreign exchange markets and financial stability.
For example, when RBI changes its monetary policy stance, the effect can eventually be seen in borrowing costs, bank lending, investment decisions and economic activity.
At the same time, RBI’s banking regulation and supervision help maintain confidence in the banking system. Its currency-management responsibilities ensure the availability of adequate and good-quality banknotes, while its payment-system role supports the rapidly growing digital payments ecosystem.
Therefore, the RBI is not simply a bank for other banks. It is the institution responsible for several critical functions that support the smooth operation of India’s monetary and financial system.
The Reserve Bank of India (RBI) is the central pillar of India’s monetary and financial system. Established in 1935 under the RBI Act, 1934, it has evolved into a comprehensive monetary authority, banking regulator, currency manager and financial-system supervisor.
Its responsibilities include monetary policy, banking regulation, currency management, foreign exchange management, government banking, payment-system regulation and maintaining financial stability.
For competitive examinations, candidates should remember the key facts about RBI history, RBI functions, the Central Board, Governor, Local Boards, currency issuance, DICGC and RBI-owned institutions. At the same time, students should avoid relying entirely on old study material because positions, appointments and institutional structures can change.
One of the most important updates is that Sanjay Malhotra is the current 26th RBI Governor, while NABARD and NHB should no longer be described as RBI subsidiaries. These updates make the topic more accurate for current competitive-exam preparation.
RBI: Frequently Asked Questions
1. What is RBI?
RBI stands for Reserve Bank of India. It is India's central bank and the country's main monetary authority.
2. When was the Reserve Bank of India established?
The Reserve Bank of India was established on April 1, 1935, under the Reserve Bank of India Act, 1934.
3. When was RBI nationalised?
RBI was nationalised on January 1, 1949.
4. Where is the headquarters of RBI?
The Central Office of the Reserve Bank of India is located in Mumbai, Maharashtra.
5. Who is the current RBI Governor?
As of August 2026, Shri Sanjay Malhotra is the 26th Governor of the Reserve Bank of India. He took charge on December 11, 2024.
6. Who recommended the establishment of a central bank in India?
The Hilton Young Commission, also known as the Royal Commission on Indian Currency and Finance, recommended the establishment of a central bank.