The Reserve Bank of India (RBI): its work, history and facts

The notes in your pocket, the interest on your bank deposits, the instalments on a home or car loan and the UPI payments you make from your phone — behind all of them stands one institution: the Reserve Bank of India (RBI). It is India's central bank, often called "the bankers' bank". Here are interesting facts about its work and history.

The RBI at a glance

How was the RBI born?

In 1926 the "Hilton Young Commission" recommended a central bank for India. The RBI Act followed in 1934, and the Reserve Bank began work on 1 April 1935. At first it was a bank owned by private shareholders; after independence it was nationalised on 1 January 1949. The RBI's history also mentions the ideas in Dr B.R. Ambedkar's book "The Problem of the Rupee". In 1943 C.D. Deshmukh became its first Indian Governor.

The RBI's main jobs

• Issuing notes: the RBI issues all notes except the ₹1 note — read The history of the Indian rupee.
• Monetary policy: setting interest rates to keep inflation in check.
• The bankers' bank: lending to banks, making their rules and supervising them.
• Banker to the government: handling the accounts of the central and state governments and managing their borrowing.
• Foreign exchange: managing the country's foreign exchange reserves and the stability of the rupee.
• Payment systems: overseeing systems such as UPI, NEFT and RTGS — read How UPI works.

What is the repo rate?

When banks need money for a short time, they borrow from the RBI. The interest the RBI charges on this borrowing is called the "repo rate". When the repo rate rises, money becomes costlier for banks, and they raise the interest on people's loans too — which cools spending and inflation. When the repo rate falls, the opposite happens. Since 2016 these rates have been set by a six-member "Monetary Policy Committee" (MPC), whose goal is to keep consumer inflation at about 4% (give or take 2%).

Did you know? For the RBI's logo, a design of a lion and a palm tree, inspired by an East India Company coin, was first considered, but in the end the lion was replaced by a tiger, a more Indian emblem. And Manmohan Singh is the only person who has been both RBI Governor (1982–85) and, later, Prime Minister of the country.

The promise written on a note

Every note carries, with the RBI Governor's signature, the words: "I promise to pay the bearer the sum of ... rupees". This promise shows that the note is backed by the RBI's guarantee. In recent years the RBI has also begun trials of a "digital rupee" (e₹). In December 2024 Sanjay Malhotra became the 26th Governor of the RBI. The RBI has a museum in Kolkata that offers a glimpse of the history of money in India — read The history of money.

More articles: Interesting facts · Economy questions.