Wednesday, February 24, 2010

Establishment of RBI: A brief Account

Warren Hastings, the Governor of Bengal during the twilight of eighteenth century was an unusual top end British official who introduced some noble changes within his jurisdiction in colonial India albeit his later life completely defied his preeminence and early fortune as he became the first top notch British official to pass through the disgraceful ire of impeachment. Anyway, Warren Hastings in his capacity of the Governor of Bengal recommended the establishment of a “General Bank in Bengal and Bihar” in January 1773.
Although this ceremonial initiation not lasted for long albeit the other proposal for amalgamation of three Presidency Banks {Bengal, Bombay and Madras} in 1866 were somehow remarkable which remained into existence with frequent renewal of policy intricacies. These three Presidency banks were finally amalgamated in 1921 with the incarnation as Imperial Bank of India.

Initially it was not structured to play a full scale role of a central bank nevertheless it proceeded with the optimization between the dual tough role of commercial entity with specific central banking leaning. But it remained abstained from key monetary planning-like note issue and management of foreign exchange which remained the business of Central government. Meanwhile in 1926, the Royal Commission on Indian Currency {also known as Hilton Young Commission} recommended that the dichotomy of functions and divisions of responsibility for control of currency and credit should be ended.
The commission finally came out with an idea for establishment of a Central bank with the name of “Reserve Bank of India {RBI}” with gross distinction from dominant Imperial bank-further, RBI’s continuance was contemplated imperative for advancement of banking culture in entire length and width of the country. Later with some more stout deliberations at the both Assembly and the Council of State-the contemporary Governor General approved the formation of RBI on March 6,1934. Our strong Central bank, in its current form was finally inaugurated on April 1, 1935-rest is history; the way as an apex institution, it has been playing key roles in country’s economic and financial advanceness is indeed a great accomplishment-it’s hardly astonishing today, that it placed among the top Central banks of the world.

Atul Kumar Thakur
Februray21st 2010, New Delhi

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