Reserve Bank of India is the central bank of the nation. The Central banks are a comparatively recent innovation & most central banks were established around the early 20th century. RBI was set up on account of the recommendations of Hilton Young Commission. The Reserve Bank of India Act, 1934 provides the constitutional basis of the functioning of the Bank, which initiated operations on 1st April 1935.
The Central Office of the Reserve Bank was originally established in Calcutta but was permanently moved to Mumbai in the year 1937. The Central Office of Reserve Bank of India is where the Governor sits & where policies are devised. Though initially privately owned, since nationalization in the year 1949, the Reserve Bank is fully owned by the Government of India.
The Reserve Bank of India began its operations by taking over from the Government the functions hitherto being performed by the Controller of Currency & from the Imperial Bank of India, public debt and the management of Government accounts. The existing currency offices at Bombay, Calcutta, Madras, Karachi, Rangoon, Lahore & Cawnpore (Kanpur) became branches of the Issue Department. Offices of the Banking Department were recognized in Bombay, Calcutta, Madras, Rangoon and Delhi.
Burma (Myanmar) separated from the Indian Union in the year 1937 but the Reserve Bank of India continued to act as Central Bank for Burma till Japanese Occupation of Burma & thereafter upto April, 1947. After India’s partition, the Reserve Bank of India served as the central bank of Pakistan upto June 1948 when State Bank of Pakistan started operations. The Bank, which was initially set up as a shareholder's bank, was nationalized in the year 1949.
Why was the Reserve Bank of India constituted?
• It was constituted to regulate the issue of banknotes
• It was constituted to maintain reserves with a vision to protecting monetary stability
• It was constituted to operate the currency and credit system of India to its advantage.
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