Banking and Reserve Bank of IndiaBanking and Reserve Bank of India

RBI acts as the apex monetary institution regulating currency, credit, and the financial stability of India.

• Central Board of Directors: Managed by a Central Board appointed by the Government of India for a 4-year term, consisting of a Governor, up to 4 Deputy Governors, and other directors.
• Sole Authority of Note Issue: RBI has the sole right to issue currency notes in India under Section 22 of the RBI Act, except one-rupee notes and coins which are issued by the Ministry of Finance.
• Banker to Government and Banks: It acts as a merchant banker to both Central and State Governments and maintains accounts of all scheduled commercial banks as a lender of last resort.
• Foreign Exchange Management: RBI manages the Foreign Exchange Management Act (FEMA), 1999, to facilitate external trade and payments and promote orderly development of the forex market in India.

Various expert committees have shaped modern Indian banking regulations, NPA management, and financial inclusion.

• Narasimham Committee-I (1991): Recommended reduction in SLR and CRR, introduction of prudential norms, capital adequacy ratio (CRAR), and deregulation of interest rates.
• Narasimham Committee-II (1998): Focused on banking sector strength, merger of strong banks, review of public sector bank autonomy, and faster reduction of Non-Performing Assets (NPAs).
• Nachiket Mor Committee (2013): Recommended comprehensive financial inclusion and payment banks/small finance banks framework to serve unbanked segments.
• Prompt Corrective Action (PCA): A framework enabling RBI to intervene and monitor weak commercial banks based on parameters like capital, asset quality, and profitability.

The Indian banking structure is multi-layered, comprising commercial banks, cooperative banks, and specialized financial institutions.

• Scheduled Commercial Banks: Banks included in the Second Schedule of the RBI Act, 1934, possessing a paid-up capital and reserves of an aggregate value of not less than ₹5 lakhs.
• Regional Rural Banks (RRBs): Established under the RRB Act, 1976, sponsored by commercial banks with share capital distribution: Central Govt (50%), State Govt (15%), and Sponsor Bank (35%).
• Cooperative Banks: Organized under the Cooperative Societies Act, operating on a 'no-profit, no-loss' basis; regulated jointly by RBI and State Governments.
• Payment Banks and Small Finance Banks: Niche banks created to promote financial inclusion; Payment banks cannot lend or issue credit cards, while Small Finance Banks cater to micro-industries and unserved sectors.

Modern technological advancements and institutional restructuring have transformed the financial landscape of India.

• Unified Payments Interface (UPI): An instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
• Central Bank Digital Currency (CBDC) - e-Rupee: Digital form of legal tender issued by RBI, launched in both wholesale (e-W) and retail (e-R) segments to complement physical cash.
• Monetary Policy Committee (MPC): A statutory 6-member body constituted under Section 45ZB of the RBI Act to determine the policy interest rate required to achieve the inflation target.
• Bad Bank (NARCL): National Asset Reconstruction Company Limited created to clean up stressed assets and bad loans from the balance sheets of commercial banks.