RBI-ECB Revised MoU: Central Bank Cooperation and ECB Profile
Why in the news
The Reserve Bank of India and the European Central Bank agreed a revised Memorandum of Understanding to deepen ties in central banking. The deal brought the ECB itself into focus.
Key facts
- MoU scope: information exchange, policy dialogue and technical cooperation between the RBI and the ECB.
- Status of ECB: the European Union’s prime monetary authority, with a combined balance sheet near EUR 7 trillion.
- Mandate: price stability in the Eurozone, meaning low and steady consumer-price inflation.
- Headquarters: Frankfurt, Germany.
- Present head: Christine Lagarde, in office since November 2019.
ECB timeline and profile
| Item | Detail |
|---|---|
| Established | 1 June 1998, under the Maastricht Treaty framework |
| Euro launched | 1 January 1999 |
| Formal EU institution | 1 December 2009, via the Treaty of Lisbon |
| Eurozone size | 11 at the start; 21 as of 2026 |
| Newest members | Croatia (January 2023), Bulgaria (January 2026, the 21st) |
| Capital stock | EUR 11 billion; shares of all 27 EU central banks set by population and GDP |
Governance and functions
- Governing Council is the main decision body and sets key interest rates.
- Executive Board carries out policy and runs daily operations; it also directs national central banks.
- General Council consults central banks of EU states outside the euro area.
- Currency: sole authority to approve euro banknote issue; it clears the volume of coins that states mint.
- Reserves: manages foreign exchange reserves and carries out FX operations.
- Payments: runs T2 (TARGET2), the system for settling large, time-critical euro payments among central banks, commercial banks and big institutions.
Related concepts
- EU vs Eurozone: the EU has 27 members; the Eurozone is the 21 that use the euro. Outside the euro area but inside the EU: Denmark, Sweden, Poland, Hungary, Czech Republic, Romania.
- Eurosystem: the ECB plus national central banks of the 21 euro countries, responsible for euro-area monetary policy.
- ESCB: the ECB plus national central banks of all 27 EU states; non-euro members keep their own monetary independence.
- Maastricht Treaty: signed 1992, effective 1993; created the EU and laid the base for the euro through the Economic and Monetary Union.
- Treaty of Lisbon: signed 2007, effective 1 December 2009; gave the ECB formal institution status and created the President of the European Council post.
- Convergence criteria: inflation within 1.5 points of the best three performers, deficit under 3% of GDP, debt under 60% of GDP, long-term rates near the EU average, and two years in ERM II.
- Quantitative easing: buying government bonds and other securities to inject liquidity.
Why the cooperation matters
- India and the euro area are large economies with growing financial links.
- A policy move on one side travels to the other via capital movements, exchange rates and trade.
- Closer institutional ties help share data, spot risks and respond jointly to global shocks.
Exam angle
- Numbers: 1998, 1999, 2009, 21 members, 27 EU states, EUR 11 billion.
- Distinguish Eurosystem (21 central banks) from ESCB (27).
- Christine Lagarde earlier led the IMF (2011-2019) and was France’s Finance Minister.