Monetary policy is the process by which the monetary authority of a country, generally the central bank controls the supply of money in the economy, by exercising its control over interest rates and other instruments, in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the RBI, who maintains price stability in the economy.
The RBI or the central bank of India was established in 1935. The RBI formulates and implements the government’s monetary policy, issues bank notes and coins, manages the country’s international payments and its foreign-exchange market, acts as an investment bank for the central and state governments, and maintains the accounts of, and extends credit to, commercial banks.
A central board of directors headed by a governor oversees the bank. In addition, four local boards, headquartered in Mumbai, Kolkata, Chennai, and New Delhi, advise the central board on regional issues and represent the interests of regional banks. All members of the central and local boards are appointed by the government for terms of four years.
The first Governor of the central bank was Sir Osborne Smith, appointed by the British. He was succeeded by another Britisher and Indian Civil Services officer, Sir James Braid Taylor in 1937, after which C D Deshmukh took over.
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