The Reserve Bank of India, established in 1935 and nationalised in 1949, is the central bank. It issues currency, manages monetary policy and acts as banker to the government and lender of last resort.
The Monetary Policy Committee sets the repo rate, the rate at which banks borrow from the RBI. Raising the repo rate makes borrowing costlier and cools inflation; the reverse repo, CRR and SLR are the other main tools.
Commercial banks are classified as public sector, private sector, foreign, regional rural and cooperative banks. Small finance banks and payment banks were added to widen financial inclusion.