A:

The Reserve Bank of India, or RBI, manages currency in India. The bank's additional responsibilities include regulating the country's credit systems and using monetary policy to establish financial stability in India. The Reserve Bank of India was founded on April 1, 1935, under the Reserve Bank of India Act. The institution is headquartered in Mumbai, India. Before 1935, the government of India had the responsibility of printing money. However, RBI was granted its role in currency management on the basis of the Reserve Bank of India Act in 1935. Specifically, section 22 of the RBI Act gives authority to the Reserve Bank to issue currency notes. The Reserve Bank of India has printing facilities throughout the country at Dewas, Mysore, and Salboni.

RBI Limitations: The Indian Government

Although the RBI has the power to print Indian currency, the government still has the final say on a majority of the Reserve Bank's actions. For example, the government decides on the various denominations printed and the design of bank notes, including the security features. The Reserve Bank has the right to print currency notes of up to Rs 10,000.  However, if the Reserve Bank wanted to print anything higher, the government would need to amend the Reserve Bank of India Act. In addition, when the Reserve Bank estimates the demand for banknotes each year, it must file a written request with government officials to sign off on before printing. When making these final decisions, government officials rely heavily on advice from the Reserve Bank senior staff.

It's worth noting that in a surprise move on November 8, 2016, the Indian Government announced it would be withdrawing 500 and 1,000 banknotes from circulation to help curb counterfeiting and corruption. Following the announcement, holders of these notes were able to exchange their cash at banks; however, as of December 2016 banks no longer exchange these notes. As a replacement, new 500 and 2,000 denomination notes have been issued. The following denominations are now in circulation: 5, 10, 20, 50,100, 500 and 2000 notes. Along with the following coins: 50 paise, 1, 2, 5 and 10 Rupee.

What About Coins?

While the Reserve Bank of India prints currency, the government of India directly handles the minting of coins. Coins are minted at the four India government mints at Alipore in South Kolkata, Saifabad in Hyderabad, Cherlapally in Hyderabad and Noida in Uttar Pradesh. Although the government handles minting coins, the Reserve Bank issues them for circulation.

Other Responsibilities

In addition to printing money, the Reserve Bank of India has other major responsibilities aimed at maintaining the stability of the Indian financial system. The Reserve Bank of India issues monetary policy and controls and supervises banks across the country.

The Reserve Bank reviews its monetary policy strategy every two years, as well as each quarter. The main objectives of the Reserve Bank's monetary policy is to control inflation, control bank credit, and control interest rates.

The banking system in India is made up of numerous public, private, foreign, co-operative and regional rural banks. The Reserve Bank is in charge of supervising the overall operations of these various institutions to maintain financial stability.

RELATED FAQS
  1. Why would the Federal Reserve change the reserve ratio?

    Understand the Federal Reserve's monetary policy and the tools it uses to change that monetary policy. Learn about the reserve ... Read Answer >>
  2. How does a Foreign Institutional Investor (FII) manage currency risk when investing ...

    Find out how foreign institutional investors protect themselves against inflation and currency risks when investing in international ... Read Answer >>
  3. What happens if the Federal Reserve lowers the reserve ratio?

    Learn about the Federal Reserve's monetary policy and the tools it uses to control it. Understand what happens if the Federal ... Read Answer >>
  4. Why do commercial banks borrow from the Federal Reserve?

    Learn how commercial banks borrow from the Federal Reserve to meet minimum reserve requirements, and discover the pros and ... Read Answer >>
  5. What are common mutual funds an investor should consider for investing in banks?

    Discover some of the mutual funds that are most popular with analysts and investor for investing in the banking industry ... Read Answer >>
  6. What countries are driving most of the growth of the Internet sector?

    Learn which countries are expected to lead the growth of the Internet sector in the short term. Most of the growth comes ... Read Answer >>
Related Articles
  1. Investing

    India's $178 Billion Loan Crisis

    Indian banks have struggled with corporations for years but things may have finally come to a head.
  2. Retirement

    Can You Retire in India with $200,000 in Savings?

    India's cost-of-living ranks among the lowest in the world, but retiring there presents some challenges unrelated to finances.
  3. Investing

    India Remains An Emerging Market Bright Spot

    Change has finally come to India. The election of a business-friendly reformer appears to be the spark that will send Indian equities higher.
  4. Financial Advisor

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  5. Investing

    A Third of All ATMs in India Do Not Work

    The Reserve Bank of India plans to get banks to fix the problem.
  6. Insights

    Understanding the Trends Driving India's Rise

    Numerous factors support India’s rise as a global superpower and will help the economy continue on a high and sustainable growth path.
  7. Investing

    Top 4 Mutual Funds With Exposure to India

    Discover four mutual funds that invest in India and how these emerging market portfolios are poised to take advantage of rapid growth in the nation's economy.
  8. Investing

    How India Makes Money

    India currently has the ninth largest nominal GDP (and third largest in PPP) in the world.
  9. Insights

    India Is Eclipsing China's Economy As Brightest BRIC Star

    It seems fitting that on the occasion of Diwali – the Hindu “festival of lights” – India should emerge as the brightest star in the BRIC firmament.
  10. Investing

    India: An Excelling Emerging Market

    Investors pondering the ascent of emerging markets stocks in 2017 do not need to look much further than India.
RELATED TERMS
  1. Reserve Bank Of India - RBI

    The central bank of India, which was established on April 1, ...
  2. National Commodities And Derivatives Exchange - NCDEX

    India's largest and most recognized commodities exchange, which ...
  3. Reserve Ratio

    The portion (expressed as a percent) of depositors' balances ...
  4. Foreign Exchange Dealers Association Of India - FEDAI

    An association of banks specializing in the foreign exchange ...
  5. Reservable Deposit

    A bank deposit subject to reserve requirements. Reserve requirements ...
  6. Working Reserves

    Reserves held by banks above the required minimum level - or ...
Hot Definitions
  1. Trustee

    A person or firm that holds or administers property or assets for the benefit of a third party. A trustee may be appointed ...
  2. Gross Domestic Product - GDP

    GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  3. Debt/Equity Ratio

    The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
  4. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
Trading Center