Doing Business in India For Dummies®

Checking Out India’s Banking Structure

Understanding the banking structure in India is crucial for you. You need to know how transactions are conducted. India doesn’t follow the federal structure of banking common in some countries (the United States, for example). Instead, the country’s structure is a bit more unified. India’s banking system is complex because it consists of various levels at which the banks operate. Ranging from a gigantic entity like the State Bank of India (formerly the Imperial Bank of India) to non-banking finance companies, you find a huge spectrum. This section helps you wrap your brain around the intricacies of India’s banking framework.

The Reserve Bank of India

India’s central bank is the Reserve Bank of India (RBI). It came into existence in 1935. The basic function of the RBI is clearly set out in its official preamble, which states that it’s the RBI’s responsibility “to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”

The role of a central bank like the RBI can’t be understated, especially in a developing economy. Apart from issuing currency, its main functions include

✓	Acting as the banker of the government, formulating and implementing the Indian monetary policy
✓	Regulating the Indian banking system, prescribing and regulating the entire banking mechanism
✓	Managing the Foreign Exchange Management Act ...