In mint condition, ...over 70 years of the RBI

The Reserve Bank of India began operations as private shareholders' entity on April 1, 1935, which makes it 72 years old. It was nationalised on January 1, 1949.

The preamble of the Act of 1934 which set it up says it has "...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage".

Barring a few nuts, no one will dispute that it has done rather a good job of carrying out its remit. Indeed, if one reflects on its performance without the clouding lenses of vested interest, as an institution the RBI stands as tall as the Supreme Court and the Election Commission. Like them, it has done - and is doing - what it was enjoined by the law to do, namely, "secure monetary stability in India".

The problem, as always, is that when great institutions do their jobs, they also prevent others from having their way to the extent that they think is their right. These others can either be private interests, or the government.

But most deadly, as we are seeing now, is a combination of the two. And this combination can get really lethal when it is driven by well-meaning persons of goodwill with very narrow foci.

In its 70-odd years the RBI has had to face this problem several times, almost once every decade, in fact. The skirmishing has been very unseemly and always had just one result. The RBI has had to back down because that is in the nature of things.

Thus, in the early 1940s the British government sent the first governor packing because it thought he was being too friendly to the natives. In the second half of the 1950s, when the governor protested about something the finance minister proposed to do, he was literally shouted at by him. He quit.

In March 1966 the Prime Minister personally negotiated the devaluation and informed the RBI several weeks later. In July 1969, she nationalised 14 private banks without consulting the RBI.

The 1970s saw the emergence of a different combination of government and vested interests. This time the latter was purely party political in nature. Together, in spite of persistent warnings by the RBI, the combination ruined the banking system in ways that have been well documented. The 1970s saw as many as five governors, three of whom held office for a year or less.

The 1980s saw four governors and none of them served a full term. By the mid-1980s, the government-vested interest combination had swerved back in favour of private interests, and one governor was removed from office for reasons that can only be hinted at. Another, in the mid-1980s, resisted this form of PPP and almost quit when the RBI's powers were sought to be curtailed.

But when the chips were down in 1990 and 1991 and India could not get a pennyworth of credit internationally - and when the government was in helpless disarray - it was the RBI that held one end up.

September 1989 to July 1990 was perhaps the RBI's finest hour and it is a pity that the men who kept the balls in the air will never be properly feted and honoured. They were the unsung heroes of the 1991 crisis.

Subsequently, the era of fiscal dominance ended and monetary policy came back into its own. The RBI then started to bloom and today stands internationally acknowledged as one of the best central banks in the world. An important reason for this was that between 1992 and 2003, economists were governors and enjoyed excellent rapport with the finance ministers.

The record is not wholly without blemish. The 1992 scam was the RBI's fault. Its supervision of banks has also not been as good as it could be. But these mistakes and shortcomings apart, and in spite of its rigid bureaucratic structure, the RBI has served India well.

It has been asking to be relieved of some of its redundant responsibilities. Hopefully, in the next 60 years perhaps, the government will get around to amending the Act.