RBI's 90 Year Journey

Sir Osborne Smith was the first governor of the Reserve Bank, serving from April 1, 1935, to June 30, 1937.

The RBI commenced operations on April 1, 1935, based on the recommendations of the Hilton Young Commission.

Sir Osborne Smith was the first governor of the Reserve Bank, serving from April 1, 1935, to June 30, 1937.

A professional banker, he served for over 20 years with the Bank of New South Wales and 10 years with the Commonwealth Bank of Australia before coming to India in 1926 as managing governor of Imperial Bank of India.

The Reserve Bank of India, which performs the dual role of monetary policymaking and regulating banks, enters its 90th year on Monday, April 1, 2024.

RBI, unlike many other central banks, is a full-service central bank.

The functions of the Indian central bank include:

• Regulating and supervising commercial and co-operative banks
• Regulating the foreign exchange (forex) market
• Supervising payment and settlement systems
• Making monetary policies
• Issuing currency
• Managing government debt
• Acting as gatekeepers of the external sector

Factoid

Burma (now Myanmar) seceded from the Indian Union in 1937, but the RBI continued to act as the Central Bank for Burma until the Japanese Occupation of Burma and later until April 1947.

After the Partition of India, the RBI served as the central bank of Pakistan until June 1948, when the State Bank of Pakistan commenced operations.

Sir Benegal Rama Rau, a member of the Indian Civil Service, was the longest-serving governor of the RBI, serving from August 1949 to January 1957.

Dr Manmohan Singh, who was RBI governor from September 16, 1982, to January 14, 1985, went on to become the finance minister of the country and then prime minister (2004-2014).

In 2018, Dr Urjit Patel became the first governor to resign in 43 years, possibly over differences with the government regarding the RBI's surplus distribution.

Shaktikanta Das, the 25th governor, is set to become the longest-serving governor after Sir Benegal Rama Rau once he completes his second term in December this year.

The evolution

Initially, the RBI played a developmental role in a country that had just become independent. While the initial focus was on agriculture, with the start of the Plan period, the RBI pioneered the concept of using finance to catalyse development.

It was instrumental in setting up many institutions like the Deposit Insurance and Credit Guarantee Corporation of India, the Industrial Development Bank of India, and the National Bank of Agriculture and Rural Development, among others, to develop the financial infrastructure of the country.

With economic liberalisation in 1991, the RBI's focus shifted back to core central banking functions like monetary policy, supervision and regulation of banks, overseeing the payments system, and developing the financial markets.

The Journey

Feature Presentation: Ashish Narsale/Rediff.com