Role of RBI in capital market

(i) operating monetary policy with the aim of maintaining economic and financial stability and ensuring adequate financial resources for development purposes; (ii) meeting the currency requirement of the public; (iii) promotion of an efficient financial system; (iv) foreign exchange reserve management; (v) the conduct of banking and financial operations of the government.

The Reserve Bank of India (RBI) was established on 1.4.1935, in accordance with the provisions of the RBI Act, 1934. The main functions of RBI are : (i) operating monetary policy with the aim of maintaining economic and financial stability and ensuring adequate financial resources for development purposes; (ii) meeting the currency requirement of the public; (iii) promotion of an efficient financial system; (iv) foreign exchange reserve management; (v) the conduct of banking and financial operations of the government. The Reserve Bank has systematically focussed on developing and regulating the financial markets in view of the cross-linkages with other sectors of the economy. Further, a healthy, robust and vibrant financial market is crucial for stronger monetary policy transmission. To enable the smooth functioning of the market and to contain systemic risks that can adversely impact the real economy, the Reserve Bank continues to play a strategic role. RBI controls the monetary policy of India by controlling cash liquidity in the country. Frequent alteration of the values of financial tools like Cash Reserve Ratio (CRR), Repo Rate, Reverse Repo Rate, and Statutory Liquidity Ratio (SLR), restricts the cash flow within the country. As an anti-inflationary measure, RBI limits huge foreign capital inflows to stabilize the Rupee value. RBI regulates the foreign exchange inflow and outflow, by the Foreign Exchange Management Act, 1999 of RBI. All money transfer out of India is subject to limits defined by the RBI. To maintain the exchange rate of Indian Rupee versus foreign currencies like the US Dollar, Euro, Pound sterling, and Japanese yen, RBI buys and sells foreign currencies. The Reserve Bank of India has the power to influence the volume of credit created by banks in India, which means that it is the controller of credit. Carrying out open market operations or changing the Bank rate helps RBI to achieve this. Through quantitative and qualitative measures, it controls the credit operations of other banks. The gold trade is also regulated by the Reserve Bank of India Thanks