RBI's Functions and Working

Key Insight

RBI’s 2025‑26 report spotlights tools shaping India’s monetary and financial stability.

Key Facts

1. The Reserve Bank of India (RBI) operates under the RBI Act, 1934 and the Banking Regulation Act, 1949.
2. RBI's Monetary Policy Committee (MPC) meets bi‑monthly; the repo rate stood at 6.50% as of the March 2026 MPC meeting.
3. Currency issuance: total value of banknotes and coins in circulation reached ₹34.5 lakh crore by March 2026.
4. Foreign exchange management: India's foreign exchange reserves were $620 billion at the end of FY 2025‑26.
5. Regulatory oversight: RBI supervises 12 public‑sector banks, 22 private‑sector banks and 45 foreign banks as of 2026.
6. Financial stability tools: the counter‑cyclical capital buffer (CCCB) was set at 0.5% of risk‑weighted assets in 2026.
7. RBI acts as banker, agent and adviser to the Central and State Governments, handling public debt and government accounts.

Background

The RBI’s multifaceted role—monetary policy, currency management, banking supervision and financial stability—forms the backbone of India’s macro‑economic governance. Understanding these functions is crucial for GS‑3, linking fiscal‑monetary coordination, banking reforms and the country’s external sector.

Mains Angle

GS‑3: Evaluate the effectiveness of the RBI’s monetary‑policy transmission mechanism and its financial‑stability framework in the post‑COVID recovery era.