The Reserve Bank of India (RBI) is India’s central bank. It has controlled the monetary policy of the economy and hence influenced the level of the Indian Rupee, (INR).
it commenced its operations on April 1st 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 during the era of the British Empire.
India’s government has indicated that it is ready to remove control of Indian interest rates from the RBI in what is seen as the latest incident of a dispute between numerous Indian administrations and the central bank over how to balance the need for the nation to book economic growth whilst containing creeping inflation.
Annual GDP growth in India expanded 7.5% in Q1 2015 over the same quarter of the previous year and averaged 6.0% from 1951 until 2015, reaching an all-time high of 11.4% in Q1 2010. This implied that India was displaying a high level of immunity from the economic fallout that affected the developed world.
Indian inflation was recorded at 5.4% in June 2015 following an all-time high of 11.16% in November of 2013 and a record low of 4.38% in November of 2014. Steering the economy along a path of steady inflation rate has proved elusive for the RBI. Since 2010 the RBI has tinkered with the key benchmark rate no less than on 23 occasions; 15 hikes higher and eight cuts to lower rates. That is approximately four rate interventions per year; hardly a signal that inspires confidence in the central bank.
This fact is crucial as the regulator to strike a balance between GDP growth and inflation is the interest rate; the benchmark level was 7.25% at the end of May when the RBI reduced rates by 25 basis points (bps).
A draft Indian Financial Code has been issued into the public domain. It is no easy reading exercise as it stretches to 188 pages that were produced over the past four years by the rather pompous sounding “Financial Sector Legislative Reforms Commission”.
ref: forbes
