- RBI is the central bank and monetary authority of India.
- Role in Economy:
- Monetary Management (price stability, growth).
- Regulation and supervision of financial institutions.
- Management of foreign exchange reserves.
- Banker and debt manager to government.
- Issuer of currency.
- Oversight of payment systems.
- Developmental role (credit to productive sectors).
- Relationship with GoI:
- They work in close coordination.
- RBI Governor draws powers from RBI Act, not the Central Board.
- Central Board functions in an advisory role.
- In case of fundamental disagreement, Centre can use Section 7 of RBI Act.
- Section 7 allows GoI to give written directions to RBI.
- This power is rarely used, indicating mutual respect and responsibility.
- There is a natural separation between government (spender) and RBI (money creator).