# Reserve Bank of India > India's central bank, founded 1935, sets monetary policy for a US$4-trillion economy, manages US$696 billion in foreign exchange reserves, and regulates the banking system. **Meta:** type: reference · date: 2026-07-03 · heads: · 4 takes · 1 lenses · 1 regions ## What it is The Reserve Bank of India (RBI) is India's central bank, responsible for issuing currency, managing foreign exchange reserves, supervising commercial banks and non-bank financial institutions, and setting monetary policy. Its statutory mandate, defined in the preamble of the Reserve Bank of India Act, 1934, is to maintain price stability while keeping in mind the objective of growth. Since 2016, that mandate operates through an inflation-targeting framework: a Consumer Price Index (CPI) target of 4%, within a tolerance band of 2% to 6%, set by the Government of India for five-year periods (currently April 2026 to March 2031). Monetary policy is decided by a six-member Monetary Policy Committee (MPC) under Section 45ZB of the RBI Act: the Governor (Chair), one Deputy Governor, one RBI officer, and three external members appointed by the government. The MPC meets at least four times a year. The current Governor is Sanjay Malhotra, who took office in December 2024. ## History The RBI was established on April 1, 1935 under British colonial rule, initially as a privately held institution with shareholders. India nationalized it on January 1, 1949, two years after independence. Through the 1950s and 1960s, the RBI operated a development-finance model, directing credit to agriculture and industry under administered rate ceilings and managing a fixed exchange rate tied to sterling. The rupee was devalued in 1966 during an external payments crisis; the collapse of the Bretton Woods system in 1971 moved India to a managed float. Indira Gandhi nationalized fourteen commercial banks in 1969, and the RBI became their supervisor. The 1991 balance-of-payments crisis, when India's foreign exchange reserves fell to roughly three weeks of import cover, forced a wholesale reorientation. The rupee was devalued in two tranches, import licensing was dismantled, and the RBI shifted toward market-determined interest rates over the following decade. Repo and reverse repo rates replaced administered credit ceilings as the primary instrument. The formal inflation-targeting mandate and the MPC were enacted by a 2016 amendment to the RBI Act, replacing a system in which the Governor set rates without a statutory committee. ## Current state As of July 2026, the repo rate stands at 5.25%, unchanged since December 2025. The MPC voted 6-0 to hold at its [June 5, 2026 meeting](/ko/n/rbi-rate-hold-june-2026), following an easing cycle of 125 basis points since February 2025, the most aggressive since 2019. Governor Malhotra trimmed the FY26-27 real GDP forecast to 6.6% and raised the CPI forecast to 5.1%, with food inflation at 4.8% in May 2026 and the southwest monsoon running 41% below normal as of mid-June. India's foreign exchange reserves stood at US$696 billion in early April 2026. The RBI's balance sheet expanded more than 20% during FY26, reaching approximately 91.97 lakh crore rupees. The June hold was paired with a rupee-support package including a new FCNR-B deposit scheme and a US$10 billion dollar-rupee swap, covered separately in [Rupee at 94 against the dollar, RBI rolls out FCNR-B scheme and $10bn swap to stem the slide](/ko/n/india-rupee-rbi-fx-2026). Beyond rates, the RBI regulates India's payments infrastructure including [UPI](/ko/n/upi-global-expansion-2026), co-runs the Digital Rupee (e-rupee) CBDC pilot, and tightened [microfinance sector](/ko/n/india-microfinance-stress-2026) rules in 2024 to cap household debt burdens after a wave of over-indebtedness. ## Relationships The RBI is formally independent but the Government of India sets its inflation target, appoints the Governor and external MPC members, and negotiates the annual surplus-transfer: how much of the RBI's profits flow to the Union Budget. That transfer was 2.11 lakh crore rupees in FY24, a record. The RBI co-manages India's sovereign bond program with the Finance Ministry, supporting [index inclusion](/ko/n/india-bond-index-journey-2026) in JP Morgan and Bloomberg bond indices and recent [foreign portfolio investor tax exemptions](/ko/n/india-fpi-bond-tax-exemption-2026). SEBI regulates equities; the RBI regulates banking and government securities, with periodic jurisdictional overlap. The RBI must approve bank mergers and issue all banking licenses. ## What to watch - August 2026 MPC meeting: first decision after a full reading of the southwest monsoon, the dominant variable in the FY27 CPI path - Whether CPI settles below 5% in Q3 FY27, which would reopen the case for resuming cuts - Forex reserve drawdowns: the pace and cost of rupee defense - [Microfinance](/ko/n/india-microfinance-stress-2026) non-performing loans: how far the sector's stress cycle deepens before RBI intervenes further - The annual surplus-transfer negotiation with the Finance Ministry for FY26 ## Regional takes (batched by bias / lens) ### official record - **Reserve Bank of India, Our History** (India, en) — Official institutional history of the RBI, covering its founding in 1935 through five published volumes up to 2008, tracing the monetary and regulatory evolution of India's central bank. Source: https://www.rbi.org.in/Scripts/OurHistory.aspx - **Reserve Bank of India, Overview and Monetary Policy Framework** (India, en) — RBI's own description of its mandate, governance, and Monetary Policy Committee structure under Section 45ZB of the RBI Act, including the 4% CPI target and 2-6% tolerance band effective April 2026 to March 2031. Source: https://www.rbi.org.in/scripts/FS_Overview.aspx?fn=2752 - **Reserve Bank of India, Monetary Policy** (India, en) — Official RBI monetary policy page carrying current and historical policy statements, including the June 5, 2026 decision to hold the repo rate at 5.25% with a neutral stance. Source: https://www.rbi.org.in/scripts/Annualpolicy.aspx - **Reserve Bank of India, Annual Report 2024-25** (India, en) — The RBI's annual report covering FY2024-25 operations, balance sheet, and policy frameworks; the FY25-26 report documents a 20-plus percent balance sheet expansion to approximately 91.97 lakh crore rupees. Source: https://www.rbi.org.in/Scripts/AnnualReportMainDisplay.aspx ## Across the graph - Related: [[rbi-rate-hold-june-2026]], [[india-rupee-rbi-fx-2026]], [[india-fpi-bond-tax-exemption-2026]], [[india-bond-index-journey-2026]], [[upi-global-expansion-2026]], [[india-microfinance-stress-2026]] - Entities: Org:reserve Bank of India, Sanjay Malhotra, Person:narendra Modi, Currency:indian Rupee, India --- Canonical: https://rbtfl.xyz/ko/n/reserve-bank-of-india-dossier