RBI@90 program

Source-This post on RBI@90 program is based on the article “PM addresses RBI@90 opening ceremony” published in “PIB” on 1st April 2024.

Why in the News?

Recently PM Narendra Modi attended the the opening ceremony of RBI@90, a program marking 90 years of the Reserve Bank of India, in Mumbai, Maharashtra. He also released a commemorative coin to mark 90 years of RBI.

RBI establishment and history

1. Established– The RBI was founded on April 1, 1934, after suggestions from the Royal Commission on Indian Currency and Finance to ensure the country’s monetary stability.

2. Commencement of operations– It started functioning on April 1, 1935, with Sir Osborne Smith as its first Governor.

3. Headquarter– The RBI’s main office was first in Kolkata but moved to Mumbai in 1937.

Significant achievements of RBI

1. Balance sheet and liquidity support– As of March 31, 2023, the RBI’s balance sheet is at a remarkable Rs 63 lakh crore, surpassing the government’s annual budget. With this robust balance sheet, the RBI offered liquidity support equivalent to nearly 9% of GDP (US$ 227 billion) after the COVID-19 pandemic.

2. Foreign Exchange Reserves– India’s foreign exchange reserves have now reached a significant USD 642 billion, ranking fourth globally. These reserves are vital for stabilizing the value of the rupee and have supported India during global crises like the 1997 East Asian currency crisis and the 2008 financial crisis.

3. Inflation Management– Over time, the RBI’s responsibility for managing inflation or price stability has changed. In 2016, a flexible inflation targeting system was introduced. This involves a six-member Monetary Policy Committee (MPC) determining interest rates to keep inflation within a target range of 2-6%, with 4% as the goal.

4. Financial Sector Regulation– The RBI has taken steps to lower non-performing assets (NPAs) in banks and keep a healthy capital adequacy ratio between 15-16%. It has also acted as a lender of last resort, helping troubled banks such as Yes Bank and Lakshmi Vilas Bank.

UPSC Syllabus- Indian Economy