What is RBI's role?

Oct 26, 2013, 05.36 PM IST

According to Sonal Varma, Executive Director & India economist, Nomura, the Reserve Bank of India is also the regulator of the banking system. It is also responsible for setting the interest rates in India.

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What is RBI's role?

According to Sonal Varma, Executive Director & India economist, Nomura, the Reserve Bank of India is also the regulator of the banking system. It is also responsible for setting the interest rates in India.

Like this story, share it with millions of investors on M3

What is RBI's role?

According to Sonal Varma, Executive Director & India economist, Nomura, the Reserve Bank of India is also the regulator of the banking system. It is also responsible for setting the interest rates in India.

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Q: What Reserve Bank choose to do and how they are the ones finally who impact the rate decisions that affect all of us?

A: The Reserve Bank of India (RBI) has multiple functions. It is responsible for all the notes that we have. It is responsible for the entire notes and coins that are in circulation. The Reserve Bank of India is also the regulator of the banking system. It is also responsible for setting the interest rates in India. Our monetary policy as we know it, Reserve Bank of India determines which levels that you and me as consumers borrow or favours receive received for the interest rate setting for an economy is also determined by the Reserve Bank of India. The RBI also determines what should be the money supply growth in the country. If it wants to boost demand, if it wants growth to pick up it can inject a lot more of money into the system to generate growth.

On the other hand, if it wants the economy to slow down because it believes there is excess demand then it can tighten the money supply in the system and therefore try to bring about a slow down in the economy. There are multiple factors to what an Reserve Bank Of India does, interest rate setting being the most important for us in the financial market.

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