Managing foreign exchange :-
The central bank manages to reach different goals of the Foreign Exchange Management Act, 1999. Their objective is to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
With increasing integration of the Indian economy with the global economy arising from greater trade and capital flows, the Foreign Exchange Market has evolved as a key segment of the Indian financial market and RBI has an important role to play in regulating & managing this segment. RBI manages forex and gold reserves of the nation.
On a given day, the foreign exchange rate reflects the demand for and supply of foreign exchange arising from trade and capital transactions. The RBI’s Financial Markets Department (FMD) participates in the foreign exchange market by undertaking sales / purchases of foreign currency to ease volatility in periods of excess demand for/supply of foreign currency.
Issue of currency :-
Reserve bank of India is the sole body who is authorized to issue currency in India. The bank also destroys the same when they are not fit for circulation. All the money issued by the central bank is its monetary liability, i.e., the central bank is obliged to back the currency with assets of equal value, to enhance public confidence in paper currency. The objectives are to issue bank notes and give public adequate supply of the same, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development because both objectives are diverse in themselves. For printing of notes, the Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the Government of India, has set up printing presses at Nashik, Maharashtra and Dewas, Madhya Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), also has set up printing presses in Mysore in Karnataka and Salboni in West Bengal. In all, there are four printing presses.
Banker's bank :-
Reserve Bank of India also works as a central bank where commercial banks are account holders and can deposit money. RBI maintains banking accounts of all scheduled banks. Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate and open market operations. As banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and helps the inter-bank transfer of funds. It can grant financial accommodation to schedule banks. It acts as the lender of the last resort by providing emergency advances to the banks.
Regulator of the Banking System :-
RBI has the responsibility of regulating the nation's financial system. As a regulator and supervisor of the Indian banking system it ensures financial stability & public confidence in the banking system. RBI uses methods like On-site inspections, off-site surveillance, scrutiny & periodic meetings to supervise new bank licenses, setting capital requirements and regulating interest rates in specific areas.
Detection of fake currency :-
In order to curb the fake currency menace, RBI has launched a website to raise awareness among masses about fake notes in the market. www.paisaboltahai.rbi.org.in provides information about identifying fake currency.
Custodian to foreign exchange :-
The Reserve Bank has custody of the country’s reserves of international currency, and this enables the Reserve Bank to deal with crisis connected with adverse balance of payments position.
