Functions and Importance

Main Functions

Monetary Authority:

•     Formulates, implements and monitors the monetary policy.
•     Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and supervisor of the financial system:

•     Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
•     Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

•     Manages the Foreign Exchange Management Act, 1999.
•     Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

•     Issues and exchanges or destroys currency and coins not fit for circulation.
•     Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

•     Performs a wide range of promotional functions to support national objectives.

Regulator and Supervisor of Payment and Settlement Systems:

•     Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.
•     Objective: maintain public confidence in payment and settlement system

Related Functions

•     Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
•     Banker to banks: maintains banking accounts of all scheduled banks.