Developmental Functions of RBI

State the developmental functions of R.B.I.

Contents

Developmental Functions of RBI

India adopted the strategy of planned development programme with a view to accelerating the rate of growth. Following points should bring out the contribution of the Reserve Bank of India to the process of economic growth:

1. Development of Agricultural Finance – RBI conducts research regarding various problems of agricultural credit. Besides this, the bank advises the central government, state governments and co-operative societies on the various aspects of agricultural growth.

2. Promotion of Industrial Finance – Reserve Bank provides significant financial assistance for the industrial development of the country. It established Industrial Finance Department in 1957. This department executes all plans of the Reserve Bank regarding industrial finance.

3. Promotion of Export Assistance – Export Houses get financial – assistance from the Reserve Bank, both directly as well as indirectly by way of Refinance of the loans given by other financial institutes. In 1963 export credit bill plan was also started. And, in 1982 it was with the assistance of Reserve Bank that the government established Export-Import Bank. This Bank avails of the credit facility from the Reserve Bank.

4. Development of Bill Market – Organised bill market is a very important element of economic growth. Reserve Bank has made concerted efforts for the development of bill market. In this regard it initiated its first plan in 1952. This plan was made applicable for all the Scheduled Bank from 1954 onwards. As a result of development of the Bill Market it can be possible to make the monetary policy more successful.

5. Development and Regulation of Banking System – Reserve Bank has very efficiently developed and regulated the banking system. It is because of the notable efforts of Reserve Bank that banking system in India has assumed the status of development banking.

6. Development of Human Resources – In order to develop human resource, the RBI is running three specialized colleges where staff of the RBI other banks, financial institutions and foreign agencies are trained in banking and agricultural banking. These colleges are Bankers Training college, Mumbai, college of Agricultural Banking, Pune and RBI staff college, Chennai.

7. Establishment of credit Information Bureau – In order to help banks and financial institutions to know the real worth of creditors, on the lines of other countries recently credit information Bureau has been set up to collect credit information and share it on payment basis. It is expected that it will help banks and institutions to reduce bad debts.

8. Established Reconstruction Company – On the initiative of the RBI, Asset Reconstruction company has been established which specializes in the recovery and liquidation of assets. It buys big assets at discounted rate from lender bank or financial institution and recovers the due from the borrowers.