Economy & Finance • Topic 2 of 4

Banking & RBI

The Reserve Bank of India (RBI), established in 1935 and nationalised in 1949, is the central bank: it issues currency, controls monetary policy, and acts as banker to the government. Its main tools are the repo rate, reverse repo rate, CRR and SLR.

What the RBI does

The RBI is the central bank — it issues currency (except the one-rupee note and coins, issued by the Ministry of Finance), is banker to the government and to other banks, and runs monetary policy to control money supply and inflation.

The RBI's monetary-policy tools

ToolWhat it means
Repo raterate at which the RBI lends to commercial banks
Reverse repo raterate at which the RBI borrows from banks
CRR (Cash Reserve Ratio)share of deposits banks must keep with the RBI
SLR (Statutory Liquidity Ratio)share of deposits banks keep in safe assets
Other regulators. SEBI regulates the stock market; NABARD is the apex bank for rural/agricultural credit; IRDAI regulates insurance. Don't confuse their roles.

✅ Solved examples

1. In which year was the RBI established?
1935 (nationalised in 1949).
2. The rate at which the RBI lends to commercial banks is the?
Repo rate.
3. Which body regulates the stock market in India?
SEBI (Securities and Exchange Board of India).
4. Which apex bank handles rural and agricultural credit?
NABARD.

✏️ Practice — try these, take hints as needed

1. The central bank of India is the?
Issues currency.
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—
Reserve Bank of India (RBI)
2. The portion of deposits banks must keep with the RBI is the?
Cash Reserve…
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—
Cash Reserve Ratio (CRR)
3. SEBI regulates which market?
Shares.
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—
Stock / securities market
4. The RBI was nationalised in which year?
Late 1940s.
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—
1949
5. NABARD focuses on credit for?
Villages & farming.
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—
Rural & agriculture

📝 Topic test — 8 questions

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