- Reserve Bank of India Act, 1934 was enacted on March 06, 1934 and is effective since April 1, 1935. It extends to the whole of India.
- The RBI Act, 1934 has been amended 88 times so far and the latest amendment was through the Finance (No 2) Act, 2019.
- There are a total of 11 chapters comprising of 129 Sections in the Reserve Bank of India Act, 1934.
- There are two schedules in the act.
- The first schedule of RBI Act, 1934 includes the areas served by various local boards.
- The second schedule of RBI Act, 1934 includes the scheduled banks comprising a list of 225 banks.
Preamble of RBI Act, 1934
An Act to constitute the Reserve Bank for India
- to regulate the issue of Bank notes and
- the keeping of reserves with a view to securing monetary stability in India and
- generally to operate the currency and credit system of the country to its advantage and
- whereas it is essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy and
- the primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth and
- the monetary policy framework in India to be operated by the Reserve Bank of India.
The first schedule areas served by various local boards
- The Western Area shall consist of the States of Goa, Gujarat, Madhya Pradesh and Maharashtra and the Union Territories of Dadra and Nagar Haveli and Daman and Diu.
- The Eastern Area shall consist of the States of Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim, Tripura and West Bengal and the Union Territories of Andaman and Nicobar Islands.
- The Northern Area shall consist of the States of Jammu & Kashmir, Punjab, Haryana, Himachal Pradesh, Rajasthan and Uttar Pradesh and Union Territories of Chandigarh and Delhi
- The Southern Area shall consist of the States of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala and the Union Territories of Pondicherry and Lakshadweep.
Pursuant to the recommendation of the Royal Commission on Indian Currency and Finance, a Bill was introduced in the Legislative Assembly in 1927 to create a central bank for India, which was later withdrawn due to lack of agreement among various sections of people. Subsequently, the White Paper on Indian Constitutional Reforms (1933) recommended the establishment of a Reserve Bank in India. Accordingly, a fresh bill was introduced in the Legislative Assembly in the year 1934, which got passed and received the Governor 4 General’s assent in 1935. Consequently, the RBI Act came into existence and the RBI commenced its operations as the central bank of the country on 1st April 1935 as a private shareholders’ bank with a paid up capital of rupees fifty million.
The functions of RBI are not confined within the provisions of the RBI Act, but extend to various areas, such as, regulation and supervision of banks, consumer protection, management of foreign exchange, management of government securities, regulation and supervision of payment systems, etc., for which powers are drawn from various other laws, namely, the Banking Regulation Act, 1949, Foreign Exchange Management Act, 1999, Government Securities Act, 2006, Payment and Settlement Systems Act, 2007, etc