Followings are the four main functions of the Reserve Bank of India contributing to the overall growth of the Indian economy:
1. Banker to the Government: The RBI acts as the banker to the central and state governments. It manages their accounts, provides banking services and facilitates the issuance and redemption of government securities. By efficiently managing government finances and public debt, the RBI helps in maintaining fiscal discipline and ensures that the government can meet its expenditure requirements without causing excessive inflation or crowding out private investment.
2. Issuer and Manager of Currency: The RBI has the sole authority to issue currency notes and coins in India. It manages the supply of currency to meet the transactional needs of the economy and ensures the availability of genuine and secure currency. An adequate supply of genuine currency facilitates smooth transactions and promotes trust in the monetary system.
3. Banker's Bank and Lender of Last Resort: It provides various banking services to them and acts as a lender of last resort to ensure financial stability in times of crisis. RBI helps maintain stability in the financial system and ensures that banks can meet their obligations and continue to provide credit to businesses and individuals.
4. Foreign Exchange Management: It intervenes in the foreign exchange market to stabilize the value of the Indian rupee against other major currencies. A stable exchange rate also helps in controlling inflation by keeping import costs in check.