The core purpose of RBI is: To

The
Reserve Bank of India was established on 1 April, 1935 under the Reserve Bank
of India Act, 1934. And it took over the function of issuing paper currency
from the Government of India. They approach to financial inclusion is based on
the British model. And few steps are taken by RBI. They recommended the bank
not to open frill accounts for the poor. The general credit card is issued by
banks which provide to the card holders credit up to Rs.25000 based on their
income. Know your customer also initiated by the RBI. And RBI is taking steps
to improve financial literacy in the country (Financial Inclusion, B Sujatha,
2007, p 11).

The
Reserve Bank of India, in its actions and policies seeks to promote the public
interest and the common good. RBI seeks to be a dynamic organization responsive
to public needs and encourages innovation and spirit of enquiry. The core
purpose of RBI is: To foster confidence in the internal and external value of
the rupee, and contribute to macro-economic stability. To promote the integrity,
efficiency, inclusiveness and competitiveness of the financial and payment
system. To ensure efficient management of currency as well as banking services
to the Government and banks. To support, balanced equitable and sustainable
economic development of the country.

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Monetary Policy

“Right
from 1949, the Reserve Bank’s monetary policy has been guided by three
objectives, viz., stability, growth and social justice; of course the emphasis
on one or more of these objectives has changed from time to time according to
changing situations” (Money, Banking and Public
Finance, T. N. Hajela. Ane Books Pvt. Ltd 8th edition 2009. P421).
When we speak about the supply of money, it should be adequate to meet the
demand for the money. India is a developing country and in its development
planning, it should be concentrated that the money supply is expanded only to
match the growth of real national income with expansion of credit in certain
sectors and control in others. In India the main objective of monetary policy
is to ensure the economic growth with financial adequacy and price stability.
If they are not vigilant towards expansion of credit in the money market, then
the result would be the inflationary rise in the prices. And it will directly
affect the economic growth of the country. In order to control this there are
certain instruments which can be used by the central bank. And these
instruments are used on the basis of certain factors like, condition of money
market, demand for credit, rate of inflation, impact of black money, balance of
payments etc. (Money, Banking and Public Finance, T. N.
Hajela. Ane Books Pvt. Ltd 8th edition 2009. P 4221-423).