The Reserve Bank of India (RBI) plays a pivotal role in maintaining price stability and ensuring financial stability in the country. As the central bank, its primary objective under the flexible inflation targeting (FIT) framework is to keep inflation within the target range of 4% ± 2%, thereby preserving the purchasing power of the currency and fostering macroeconomic stability. To achieve this, the RBI uses tools like the repo rate, cash reserve ratio (CRR), open market operations, and liquidity adjustment facility (LAF) to control money supply and influence demand. Simultaneously, the RBI is responsible for financial stability by regulating and supervising banks and non-banking financial companies (NBFCs), managing systemic risks, and ensuring the soundness of the financial system. It also acts as a lender of last resort during financial crises to prevent market panic and contagion. Through these dual roles, the RBI aims to create a stable monetary environment that supports sustainable economic growth while safeguarding the integrity of the financial system.

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