What is Reserve Bank of India (RBI)?
The Reserve Bank of India (RBI) was established in 1935 and serves as India's central bank, monetary authority, banker to the government, and regulator of banks and NBFCs. The Monetary Policy Committee (MPC) โ six members including the RBI Governor โ sets the repo rate (the rate at which RBI lends to commercial banks) every other month. RBI also manages forex reserves, the rupee's exchange rate (managed float), and payment systems including UPI.
Why it matters for investors
RBI decisions directly impact home loan EMIs, fixed deposit rates, the rupee's value, inflation, and credit growth. RBI has a flexible inflation target of 4% (ยฑ2%). Unlike the Fed, RBI also actively manages currency markets, intervening to smooth excessive volatility. The Governor's communication style influences market sentiment as much as the decisions themselves.