Q: What is the UPSC significance of "RBI's Functions and Working"?

This current affair on "RBI's Functions and Working" is important for UPSC GS3 — economy. Understanding its background, causes, and implications is essential for both UPSC Prelims and Mains preparation.

Q: Which GS Paper does economy fall under for UPSC?

economy topics are covered under GS3 in the UPSC Prelims and Mains syllabus. Current affairs on economy are regularly tested in UPSC examinations and require understanding of both policy dimensions and current developments.

Q: How is this current affair relevant for UPSC Mains answer writing?

For UPSC Mains, "RBI's Functions and Working" can be linked to GS3 questions on economy. Focus on the causes, government response, challenges, and way forward. Use data points and connect it with relevant schemes and constitutional provisions for a high-scoring Mains answer.

RBI's Functions and Working — UPSC Current Affairs | February 25, 2026

Must Review

RBI’s Core Functions: Pillar of India’s Monetary Stability and Financial Governance

Key Facts

RBI manages foreign exchange reserves exceeding $600 billion (2023‑24) under FEMA.
Monetary Policy Committee targets 4 % inflation with a tolerance band of ±2 % (2024 target).
Section 7 of the RBI Act, 1934 grants RBI sole authority to issue and manage currency notes and coins.
RBI regulates scheduled banks, NBFCs and cooperative banks through licensing, inspections and Basel III norms.
Quarterly Financial Stability Report assesses systemic risks and guides macro‑prudential actions.
RBI operates real‑time payment systems (RTGS, NEFT, UPI) ensuring liquidity transfer across the economy.
Under Section 45, RBI acts as lender of last resort and banker to the Government, managing public debt.

Background & Context

Established in 1935, the Reserve Bank of India functions as the country's central bank, steering monetary policy, ensuring financial stability, and managing currency. Its multifaceted role aligns with UPSC GS‑3 syllabus on monetary policy, banking regulation, and financial sector reforms.

Mains Answer Angle

In GS‑3, candidates can evaluate the effectiveness of RBI’s monetary‑policy transmission mechanism or discuss its lender‑of‑last‑resort function as a tool for safeguarding financial stability.

Full Article

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Practice Questions

Prelims

Easy

Prelims MCQ

Inflation targeting

1 marks

5 keywords

GS3

Medium

Mains Short Answer

Lender of last resort

10 marks

5 keywords

GS3

Hard

Mains Essay

Monetary policy transmission

25 marks

7 keywords

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Overview