Money, banking and the financial system (RBI, monetary policy)
Key facts
- 1 April 1935: The Reserve Bank of India began operations under the Reserve Bank of India Act, 1934, giving India a central monetary authority for curr...
- 1 January 1949: RBI was nationalised under the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, making the central bank fully governmen...
- 16 March 1949: The Banking Companies Act, 1949 came into force and later became the Banking Regulation Act, forming the statutory basis for RBI superv...
- 19 July 1969: Fourteen major Indian scheduled commercial banks were nationalised, expanding public-sector banking and redirecting credit towards devel...
- 15 April 1980: Six more private-sector banks were nationalised under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
Key Points at a Glance
- 1
1 April 1935: The Reserve Bank of India began operations under the Reserve Bank of India Act, 1934, giving India a central monetary authority for currency, credit and public debt.
- 2
1 January 1949: RBI was nationalised under the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, making the central bank fully government-owned.
- 3
16 March 1949: The Banking Companies Act, 1949 came into force and later became the Banking Regulation Act, forming the statutory basis for RBI supervision and regulation of banks.
- 4
19 July 1969: Fourteen major Indian scheduled commercial banks were nationalised, expanding public-sector banking and redirecting credit towards development needs.
- 5
15 April 1980: Six more private-sector banks were nationalised under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
- 6
2007: The Payment and Settlement Systems Act made RBI the authority for regulating and supervising payment systems and gave legal backing to netting and settlement finality.
- 7
2016: The RBI Act framework created the statutory Monetary Policy Committee under Section 45ZB, moving repo-rate decisions into a six-member voting framework.
- 8
25 March 2026: The Government renewed the CPI inflation target at 4% with a +/-2 percentage-point tolerance band through March 2031, continuing flexible inflation targeting.
- 9
11 April 2016: NPCI's UPI pilot was launched, making bank-account-to-bank-account mobile payments a major part of India's digital payment system.
Continue studying
Money and why it matters
Money is anything generally accepted as a medium of exchange, a unit of account, a store of value and a standard of deferred payment. For CET, the important point is not a theoretical definition alone: money allows goods, services, wages, savings and loans to be measured in one common unit. Without money, exchange would depend on barter and double coincidence of wants, where each person must want exactly what the other offers.
Modern money has two broad forms. Currency with the public is issued by the monetary authority, while bank deposits are created through the banking system when people deposit funds and banks lend a part of those deposits. Digital balances in bank accounts, UPI-linked accounts and cards are not a separate private currency; they are ways of transferring bank money. RBI's role is to protect trust in the rupee by regulating currency issue, bank liquidity, payments and the overall credit environment.
Remember the exam frame: money is both a daily transaction tool and a macroeconomic variable that affects prices, demand, credit and savings.
Open the complete note
This public page shows the first available section. The study pack opens the complete topic with all revision material.
7 more sections in the complete note
Open study pack