The Reserve Bank's affairs are governed by a Central Board of Directors, consisting of fourteen non-executive, independent directors nominated by the Government, in addition to the Governor and up to four Deputy Governors. Besides, one Government official is also nominated on the Board who participates in the Board meetings but cannot vote.

The RBI has 22 regional offices, mostly in state capitals. RBI is the debt-manager and banker to State governments (i.e., the provinces constituting the Indian federation).The RBI renders advice to the Central and the State Governments, particularly about financial sector reforms. In brief, the RBI has been assigned several functions, in addition to monetary management. In performing each of the functions, the statute as well as the functional content, requires that the RBI exercise varying degrees of autonomy and coordination vis-à-vis the government. The three over-arching features governing the relations with the Government are autonomy in operations; harmony in policies; and coordination in structural transformations.

The foreign exchange reserves, which have more than doubled from US$ 76 billion at the end of March 2003 to around US$ 200 billion at the end March 2007. While the level of foreign exchange reserves is extremely modest compared to that of Japan, our reserves exceed each - a full year's imports as well as the entire external debt. Since 2002, India has turned creditor to the IMF and has engaged in prepaying external debt. While the RBI is invested with multiple objectives and is not mandated by law with target/instrument autonomy, the conduct of monetary policy has consistently evolved around the goals of sustained growth, price stability, and financial stability, with a continuous rebalancing of weights assigned to each, depending on the evolving macroeconomic scenario. In the recent period, the objective of price stability and well-anchored inflation expectations has been accorded priority against the backdrop of global and domestic developments. It is heartening to note that high growth in the last four years has been associated with a moderation of inflation. The headline inflation rate, in terms of the wholesale price index, has declined from an average of 11.0 cent during 1990-95 to 5.3 per cent during 1995-2000 and to 4.9 per cent during 2002-07. The trending down of inflation has been associated with a significant reduction in inflation volatility, which is indicative of well-anchored inflation expectations, despite the visitations of adverse shocks, both domestic and external.

There is evidence that the widening and deepening of the financial sector, the diffusion of micro structural reforms along with improved regulatory and supervisory oversight have enabled the development of a robust, efficient and diversified financial system with sound and well-functioning financial markets. The combined effects of competition, regulatory measures, policy environment, and motivation have imparted greater strength, efficiency, and stability to the financial sector. The efficacy of financial sector reforms is also reflected in the significant improvement in the asset quality of the banking sector. Currently, all scheduled commercial banks are compliant with the minimum capital adequacy ratio of 9 per cent.

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