The origins of the Reserve Bank of India can be traced to 1926, when the Royal Commission on Indian Currency and Finance – also known as the Hilton-Young Commission – recommended the creation of a central bank for India to separate the control of currency and credit from the Government and to augment banking facilities throughout the country.
The Reserve Bank of India Act of 1934 established the Reserve Bank and set in motion a series of actions culminating in the start of operations in 1935. Since then, the Reserve Bank’s role and functions have undergone numerous changes, as the nature of the Indian economy and financial sector changed.
Starting as a private shareholders’ bank, the Reserve Bank was nationalised in 1949. It then assumed the responsibility to meet the aspirations of a newly independent country and its people. The Reserve Bank’s nationalisation aimed at achieving coordination between the policies of the government and those of the central bank.
Origins of the Reserve Bank of India - Timeline
o 1926: The Royal Commission on Indian Currency and Finance recommended creation of a central bank for India.
o 1927: A bill to give effect to the above recommendation was introduced in the Legislative Assembly, but was later withdrawn due to lack of agreement among various sections of people.
o 1933: The White Paper on Indian Constitutional Reforms recommended the creation of a Reserve Bank. A fresh bill was introduced in the Legislative Assembly.
o 1934: The Bill was passed and received the Governor General’s assent
o 1935: The Reserve Bank commenced operations as India’s central bank on April 1 as a private shareholders’ bank with a paid up capital of rupees five crore (rupees fifty million).
o 1942: The Reserve Bank ceased to be the currency issuing authority of Burma (now Myanmar).
o 1947: The Reserve Bank stopped acting as banker to the Government of Burma.
o 1948: The Reserve Bank stopped rendering central banking services to Pakistan.
o 1949: The Government of India nationalised the Reserve Bank under the Reserve Bank (Transfer of Public Ownership) Act, 1948.
Ref: RBI Publication - Reserve Bank of India: Functions and Working