Background
In a family, we have a family head that looks after and supervises the smooth functioning of the family. He keeps all the members of the family intact and ensures order in the house. Family members look up to the family head for suggestions whenever required and heed to their advice for managing their lives in a better way. Likewise, we have banks in every part of the country. Every bank has a headquarter which looks into the smooth functioning of its respective branches. The bank headquarters at specific regions of the country report to the RBI about their policies, fundamental aspects of the operation, strategies etc.
On a very basic note, RBI is that prestigious authority and central operating unit, that has been bestowed with the responsibility of issuing currency notes to the country. It is the main authority bestowed with the responsibility of maintaining monetary stability in the country. It ensures the availability of currency at all levels of the country’s financial framework and decides the credit rates of interest for running the economical wagon of the nation. It manages reserves of currency for the nation. It is just like how we save money and other monetary commodities in safe lockers in our house for future usage.
See also: Repo rate vs Reverse repo vs Bank rate
Let us now look into the different factors regarding the RBI importance:
Main monetary authority of India
Whenever the government in the rule requires loans for any of its projects, 
they are funded by the RBI. Just like how every citizen relies on a bank for his saving instruments, the government of the country treats the RBI as its banker and relies on it for managing the development of the nation. The payment processes sought by the government and other due settlements are effectively managed by the RBI authorities.
RBI runs the economic wagon of the nation
The nation sees a rise in inflation at times and also achieves stability at some other times. This fluctuation keeps happening with the varied credit interest rates set by the RBI. It supervises the declaration of credit based on the availability of its cash reserves, checks on the use of money for various projects etc. In short, the economic growth and development of the country are affected by the monetary decisions taken by the RBI.
See also: Banking reforms in India
RBI is the central currency issuing authority
Currency notes are issued solely by the RBI only. Right from designing the currency notes and coins to printing and minting them and issuing them across various monetary agencies and financial handlings, the end to end process is initiated and implemented by the Central authority – the RBI. High rates of currency are controlled and at the same time availability of currency notes and coins is effectively taken care of by RBI.
RBI acts as a banker for the government
The state governments along with the central government depend on the RBI for their monetary funds. If the government requires funds for carrying out a massive public project, then it certainly requires the payment of money for the project. This task of releasing the money is done by the RBI.
The responsibility of overseeing smooth functioning of banks across the country
In a family, there are bound to be agreements and disagreements and the family head takes up the responsibility of sorting out their issues. The same thing occurs with banks as well. Within banks, there would be various differences in terms of their financial operations and banking obligations. These are overseen and settled by the RBI. Transfer of monetary funds between different banks and taking note of significant transactions and related money handling is operated by the RBI. The entire framework within which banks operate and function smoothly is carried out by the RBI. It works within its stipulated financial set-up and sets good benchmarks upon whose guidance banks operate smoothly.
See also: Non-Performing Asset (NPA) resolution and IBC framework
RBI takes care of foreign exchange
Establishing smooth and orderly transactions related to foreign currencies, stabilizing operations related to foreign exchange and maintaining gold reserves of the country are some of the pivotal roles played by the RBI. With the induction of technology, the RBI has also strengthened its infrastructure in enabling fast and efficient money transfers, secure foreign exchange systems and established the biggest monetary network of the nation.
RBI acts as the central interface as the core banking authority of India and helps run the banking sector smoothly. It looks into the financial framework of the country and owes to strengthen economic policies of our nation. With the increased use of technology, it has certainly expanded its fundamental operational base and promotes the growth and development of the nation.
See also:
Departments and job profiles at RBI
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