RBI, was established on recommendations of Hilton-Young Commission, as a private bank under RBI Act 1934.
It started functioning as a Central Bank w.ef. 01.04.1935.
RBI was nationalised on 1st January, 1949 and it is entirely owned by Govt. of India.
RBI is managed by a Central Board of Directors, headed by Governor, RBI. Beside, it has four Deputy Governors.
In addition to its Central Office in Mumbai, RBI also has four Regional Boards in Delhi, Mumbai, Chennai and Kolkata.
The main objectives of RBI include 1) to maintain monetary stability, 2) to maintain financial stability, 3) to maintain stable payment systems, 4) to ensure that credit allocation, 5) to regulate the overall volume of money and credit, 6) to promote the development of financial markets and systems to enable itself to operate/regulate.
Role and Functions of RBI
The following are major functions of RBI: (a) Monetary Authority, (b) Issuer of Currency, (c) Banker and Debt Manager to Government, (d) Banker to Banks, (e) Regulator of the Banking System, (f) Manager of Foreign Exchange, (g) Maintaining Financial Stability, (h) Regulator and Supervisor of the Payment and Settlement Systems, (i) Developmental Role
Three major objectives of monetary policy administered by RBI: 1) Maintaining price stability, 2) Ensuring adequate flow of credit to the productive sectors of the economy, to support economic growth, 3) Maintaining financial stability
Monetary Policy Committee (MPC) of RBI
MPC was set up, in 2016, which consists of six members including 1) Governor of RBI, 2) Deputy Governor, 3) One officer of RBI, 4) 3 members appointed by Central Government.
Major function of MPC is to determine the policy interest rate, to achieve the inflation target set by the Government, from time to time.
To achieve objectives of Monetary Policy, RBI makes use of direct and indirect instruments.
Direct Instruments include Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
Indirect Instruments include Liquidity Adjustment Facility (LAF), Repo Rate, Open Market Operations (OMO), Marginal Standing Facility (MSF), Standing Deposit Facility (SDF), Market Stabilisation Scheme (MSS).

MAJOR FUCTIONS

A) Banker to Central Govt. and State Governments: RBI has the statutory responsibility to function as Banker to Central Govt. For State Governments it may function as Banker after entering into an agreement with concerned State Govt.
RBI provides ways and means advances in the form of temporary overdrafts to Central and State governments.
B) Issuer of Currency
RBI is India’s sole note issuing authority. It can issue bank notes with a minimum denomination of Rs.2 and maximum of Rs.10000. Re.1 currency note is issued by Govt. of India.
The coins are issued by Government of India under Section 6 of The Coinage Act, 2011.
C) Banker and Debt Manager of the Government
RBI has the responsibility to manage the governments’ domestic debt and develop the market for government securities.
D) Banker to Banks
All banks maintain accounts with RBI to facilitate transfer of funds and settle inter-bank transactions, such as borrowing from and lending to other banks and customer transactions.
As lender of the last resort, RBI provides liquidity to banks which are unable to raise short-term liquid resources from the inter-bank market.
E) Regulator of the Banking System
As the regulator and supervisor of the banking system, the Reserve Bank protects the interests of depositors.
RBI has regulatory and supervision authority over commercial banks, Small Finance Banks, Payment Banks, Local Area Banks, Export-Import (EXIM) Bank of India, National Bank for Agriculture and Rural Development (NABARD, National Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI), Urban co-operative banks, Regional Rural Banks (RRBs), District Central Cooperative Banks and State Co-operative Banks, Non-Banking Financial Companies (NBFCs) etc.
F) Manager of Foreign Exchange
RBI has responsibility for administration of the Foreign Exchange Management Act, 1999.
RBI regulates the forex market, by issuing Authorised Dealer licenses to banks and other select institutions.
RBI also manages the foreign currency assets and gold reserves of the country
G) Regulator of Payment and Settlement Systems
RBI regulates and supervises, the Payment and Settlement Systems, by using its authority under Payment and Settlement Systems Act, 2007.
Payment systems like Real Time Gross Settlement (RTGS) Cheque Truncation System (CTS), National Electronic Funds Transfer (NEFT), Immediate Payment System (IMPS), Card payments like MasterCard, VISA, and American Express, and RuPay, Electronic Clearing System (ECS) etc. are regulated by RBI.
H) Maintaining Financial Stability
In the wake of the 2008 global financial crisis, financial stability has emerged as an important policy objective for the central banks, world over. RBI set up a dedicated Financial Stability Unit to continuously monitor, the macro financial system. RBI started publishing half-yearly Financial Stability Report (FSR) starting in March 2010.
I) Developing and Nurturing Institutions
RBI promoted a large no. of institutions, which include 1) Deposit Insurance and Credit Guarantee Corporation (1962), 2) Unit Trust of India (1964), 3) Industrial Development Bank of India (1964), 4) National Bank for Agriculture and Rural Development (1982), 5) National Housing Bank (1989), 6) Securities and Trading Corporation of India (1994), etc.