RESERVE BANK OF INDIA INTRODUCTION
Several attempts were made from time to time to set up a Central Bank in India prior to 1934.
But unfortunately these attempts failed to bear any fruit. In 1921, the Government of India
established the Imperial Bank of India to serve as the Central Bank of the country. But the
Imperial Bank did not achieve any appreciable success in its functioning as the Central Bank of
the country. In 1925, the Hilton Young Commission was asked by the Government to express its
views on the subject. The commission made out a forceful case for the establishment of a brand
new Central Bank in the country.
According to the Commission, it was not desirable to keep the control of currency and credit in the hands of two separate agencies. The Government of India controlled currency while the Imperial Bank regulated credit prior to the establishment of the Reserve Bank of India in April 1st, 1935. The Hilton Young Commission did not consider this double control on currency and credit as a desirable feature of the Indian monetary system. It was on this account that the Commission recommended the transfer of the control of currency and credit to a new Central Bank to be set up in the country. It was on this account that the Commission recommended the establishment of the Reserve Bank of India as the Central Bank of the country. The Government of India while accepting the recommendations of the Commission brought forward a Bill before the Central Legislature. But the Bill could not be passed on account of differences amongst the members of the legislature. The Government of India, therefore, postponed the idea of a new Central Bank for sometime. In 1929, the Central Banking Enquiry Committee again made a forceful plea for the establishment of the Reserve Bank. Consequently, the Reserve Bank of India Act was passed in 1934, and the Reserve Bank started functioning from 1st April, 1935.
The Reserve Bank of India is the kingpin of the Indian money market. It issues notes,
buys and sells government securities, regulates the volume, direction and cost of credit,
manages foreign exchange and acts as banker to the government and banking institutions.
The Reserve Bank is playing an active role in the development activities by helping the
establishment and working of specialised institutions, providing term finance to agriculture,
industry, housing and foreign trade. In spite of many criticisms, it has successfully controlled
commercial banks in India and has helped in evolving a strong banking system. A study of the
Reserve Bank of India will be useful, not only for the examination, but also for understanding
the working of the supreme monetary and banking authority in the country.
Several attempts were made from time to time to set up a Central Bank in India prior to 1934.
But unfortunately these attempts failed to bear any fruit. In 1921, the Government of India
established the Imperial Bank of India to serve as the Central Bank of the country. But the
Imperial Bank did not achieve any appreciable success in its functioning as the Central Bank of
the country. In 1925, the Hilton Young Commission was asked by the Government to express its
views on the subject. The commission made out a forceful case for the establishment of a brand
new Central Bank in the country.
According to the Commission, it was not desirable to keep the control of currency and credit in the hands of two separate agencies. The Government of India controlled currency while the Imperial Bank regulated credit prior to the establishment of the Reserve Bank of India in April 1st, 1935. The Hilton Young Commission did not consider this double control on currency and credit as a desirable feature of the Indian monetary system. It was on this account that the Commission recommended the transfer of the control of currency and credit to a new Central Bank to be set up in the country. It was on this account that the Commission recommended the establishment of the Reserve Bank of India as the Central Bank of the country. The Government of India while accepting the recommendations of the Commission brought forward a Bill before the Central Legislature. But the Bill could not be passed on account of differences amongst the members of the legislature. The Government of India, therefore, postponed the idea of a new Central Bank for sometime. In 1929, the Central Banking Enquiry Committee again made a forceful plea for the establishment of the Reserve Bank. Consequently, the Reserve Bank of India Act was passed in 1934, and the Reserve Bank started functioning from 1st April, 1935.
The Reserve Bank of India is the kingpin of the Indian money market. It issues notes,
buys and sells government securities, regulates the volume, direction and cost of credit,
manages foreign exchange and acts as banker to the government and banking institutions.
The Reserve Bank is playing an active role in the development activities by helping the
establishment and working of specialised institutions, providing term finance to agriculture,
industry, housing and foreign trade. In spite of many criticisms, it has successfully controlled
commercial banks in India and has helped in evolving a strong banking system. A study of the
Reserve Bank of India will be useful, not only for the examination, but also for understanding
the working of the supreme monetary and banking authority in the country.
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