Wednesday, December 6, 2023

Origins and Functions of the Reserve Bank of India

Written By Karishma K (Grade 9)

Origin Timeline

In 1926 the creation of a central bank for India was suggested by the royal commission on Indian currency and finance. In 1927 the legislative assembly passed a bill to implement the suggestion but later it was withdrawn because many people did not accept it. Later, in 1933 a new bill was introduced in the legislative assembly which recommended the creation of a reserve bank. In 1934 the bill was successfully passed. On 1st April 1935, the Reserve Bank began its operations as India’s central bank and private shareholders bank with a capital of five crore rupees. Gradually the Reserve Bank became the currency-issuing authority of Burma in 1942. In 1947 and 1948 the reserve bank stopped acting as bankers and stopped providing services to Burma and Pakistan. In 1949 the Reserve Bank was nationalized under the Reserve Bank Act which was passed in 1948. This act meant the transfer of public ownership.

Currently, the bank’s central office is in Mumbai and is headed by senior officers who have been given the post of Chief General Manager. The office has 27 departments.


The preamble of the Reserve Bank of India states its objective as “to regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability in India and to operate the currency and credit system of the country to its best”.

A few of its functions are:

  • Monetary policy
  • Cash management of the government
  • Supervision of all banking and non-banking financial institutions
  • Regulation of foreign exchanges
  • They have an important role in developing the country
  • Manage the currencies

The rising global integration helps in exposing India to global shocks and expands the scope for the growth of the Indian economy. Hence, maintaining financial stability has become important for the Reserve Bank.

Featured Image Courtesy – Mint

Karishma K
Karishma K
I love to read books and listen to music during my leisure time. I really like taking part in sports and I am interested in writing articles.


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