What are the purposes of the RMA?
The purposes of the RMA as set out in the RMA Act are as follows:

i.To promote monetary stability
Bhutan's national currency is pegged to the Indian rupee at parity, for the purpose of promoting monetary stability and therefore, a primary responsibility of the RMA is to ensure the sustainability of the peg. This means that the must RMA guarantee the free convertibility of the Ngultrum against the rupee for all legitimate purposes. The public must be confident that they can at any time exchange their Ngultrum balances into rupees freely and at parity, and for this purpose the RMA must ensure that it maintains, at all times, sufficient foreign reserves to provide this free convertibility.

Furthermore, the RMA has to keep the growth of M2, more or less in line with overall economic growth.

ii. To supervise and regulate banks and other financial institutions
Banks and financial institutions are the depositories of the public's money. When a bank failure occurs, it is not only the owners of the bank who suffer a loss, but so too will the thousands of ordinary citizens who have placed their money in deposits with the bank. Therefore, in most countries the operations of banks and other financial institutions are regulated by the central bank in order to ensure that they operate in accordance with prudential norms and do not place themselves in a situation in which their ability to repay their depositors is jeopardized. The RMA frames prudential regulations to be observed by the institutions, and supervises them to ensure their compliance with the regulations through regular reporting requirements, as well as on-site inspections.

iii. To promote credit and exchange conditions and a sound financial structure conducive to the balanced growth of the economy.
Loans and advances by the financial institutions are a key factor in the stability of the economy - too much of it will increase aggregate demand, thereby, possibly resulting in an increase in the rate of inflation, or an imbalance in the balance of payments, while too little of it may retard the rate of economic growth, thereby affecting output and employment. Most central banks now try to exercise control over total credit by the financial sector through indirect means such as the rate charged on advances to them, and the ratio of reserves that banks are required to maintain against their deposit liabilities. Therefore, an important responsibility of the RMA is to ensure that credit growth is consistent with the rate of growth of the economy, so that prices do not fluctuate sharply keeping in mind the special economic relationship with India. For this purpose, the Act authorizes the RMA to prescribe reserve requirements on the banks against their deposit liabilities, to issue notes, bills, securities and other evidences of indebtedness to sterilize the liquidity of the banks, and also to grant short-term loans and overdrafts to the financial institutions to inject liquidity into the economy when necessary.

What is the status of RMA?
The RMA was established by the Royal Monetary Authority of Bhutan Act, passed by the National Assembly in 1982. According to Part II Clause 4 of the Act, the RMA is a "body corporate with perpetual succession and a common seal". The Act provides the RMA with the power to "enter into contracts and issue obligations, sue and be sued in its own name, acquire, hold, and dispose of property.…….," and "to exercise all powers specifically granted by the provisions of the Act, and such incidental powers as shall be necessary to carry out the powers so granted." This implies that the RMA is a statutory body that is distinct from the Government, and which is solely responsible for its own actions. However, while any action on the RMA's part cannot be construed as an act of the government, it does not mean that is not accountable to the government. Like most central banks, its accountability to the government lies in fulfilling the purposes for which it was established.

Who supervises the RMA?
In terms of its Act, all powers of the RMA are vested in its Board of Directors which is responsible for the policy and general administration. While all matters of policy are deliberated and subject to approval by the Board, certain administrative powers are delegated to the Managing Director and other officers. The Managing Director is responsible to the Board for the day-to-day administration of the Authority.

How does the RMA make profits and what are they used for?
Although the RMA is not a commercial organization driven by the profit motive, it does generate substantial surpluses from its operations. The bulk of the profits are generated from investments in financial markets abroad as part of its foreign reserve management strategy. Secondly, it receives interest income on loans and advances to the government and the financial institutions. Some income is also generated in the form of royalties on legal tender coins that it has authorized agents abroad to mint and sell on its behalf.
After setting aside certain amounts in accordance with the provisions of the Act, the entire balance of the annual surplus is transferred to the Royal Government.

How are the foreign currency reserves managed?
The Act authorizes the RMA to maintain the external reserves in the form of gold, foreign exchange in the form of currency or bank balances abroad, bills of exchange and promissory notes denominated in foreign currency and payable abroad, treasury bills issued by foreign governments and international financial institutions, and securities issued or guaranteed by foreign governments and international financial institutions. Accordingly, most of the external reserves are invested in deposits with foreign central banks and well known commercial banks, as well as in treasury bills issued by foreign governments. A part of the reserves has been placed with an internationally renowned asset management company, which actively manages the funds through investments in fixed income instruments permitted under the Act. A negligible amount is held in the form of gold.