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Role of Reserve Bank of India (RBI) in Indian Economy

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Recommended reading: India’s apex bank: The Reserve Bank of India(RBI), it’s objectives and functions

Bank Issue:

Under Section 22 of the Reserve Bank of India Act, the bank has the sole sight to issue bank notes of all denominations. The notice issued by the Reserve bank has the following advantages:

• It brings uniformity to note issue.

• It is easier to control credit when there is a single agency of note issue.

• It keeps the public faith in the paper currency alive.

• It helps in the stabilization of the internal and external value of the currency and

• Credit can be regulated according to the needs of the business.

The system of note issue as it exists today is known as the minimum reserve system. The currency notes issued by the Bank arid legal tender everywhere in India without any limit. At present, the Bank issues notes in the following denominations: Rs. 2, 5, 10, 20, 50 100, and 500. The responsibility of the Bank is not only to put currency into, or withdraw it from, the circulation but also to exchange notes and coins of one denomination into those of other denominations as demanded by the public. All affairs of the Bank relating to note issue are conducted through its Issue Department.

Banker, Agent and Financial Advisor to the State:

As a banker agent and financial advisor to the State, the Reserve Bank performs the following functions:

• It keeps the banking accounts of the government.

• It advances short-term loans to the government and raises loans from the public.

• It purchases and sells through bills and currencies on behalf to the government.

• It receives and makes payment on behalf of the government.

• It manages public debt and

• It advises the government on economic matters like...