Reserve Bank of India Act, 1934 :
The Reserve Bank of India Act,1934 was enacted to constitute the Reserve Bank of India with an objective to (a) regulate the issue of bank notes (b) for keeping reserves to ensure stability in the monetary system (c) to operate effectively the nation’s currency and credit system.
The RBI Act covers: (i) the constitution (ii) powers (iii) functions of the Reserve Bank of India. The act does not directly deal with the regulation of the banking system except for few sections like Section 42 which relates to the maintenance of CRR by banks and Section 18 which deals with direct discount of bills of exchange and promissory notes as part of rediscounting facilities to regulate the credit to the banking system.
The RBI Act deals with:
(a) incorporation, capital, management and business of the RBI
(b) the functions of the RBI such as issue of bank notes, monetary control, banker to the Central and State Governments and banks, lender of last resort and other functions
(c) general provisions in respect of reserve fund, credit funds, audit and accounts
(d) issuing directives and imposing penalties for violation of the provisions of the Act