By which act was the ‘Reserve Bank of India’ established?(Only From the given options)

Question

Question

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MP Police Constable 2023 Official Paper (Held On: 10 Sept, 2023 Shift 2)

Answer 1

The correct answer is Government of India Act, 1935.

Key Points

The Reserve Bank of India (RBI) was established under the provisions of the Government of India Act, 1935, which laid the foundation for its creation as the central bank of India.
RBI officially commenced its operations on April 1, 1935, as a private shareholders' bank before being nationalized in 1949.
The act provided for the centralization of monetary policy and the regulation of currency, banking, and credit in India through the RBI.
The Reserve Bank of India was initially headquartered in Kolkata, but it was moved to Mumbai in 1937, where it remains today.
The RBI was given authority to act as the issuer of India's currency, manage foreign exchange reserves, and oversee the functioning of commercial banks and other financial institutions.

Additional Information

Reserve Bank of India Act, 1934:
- Although the RBI was established under the Government of India Act, 1935, the Reserve Bank of India Act, 1934 provides the statutory framework for the functioning of the bank.
- The act defines RBI's objectives, organizational structure, powers, and responsibilities, including monetary stability and credit control.
Nationalization of RBI:
- In 1949, the Reserve Bank of India was nationalized, becoming a fully government-owned institution.
- This transition reinforced its role in shaping India's economic and financial policies.
Functions of RBI:
- RBI regulates the issuance and supply of currency in India.
- It acts as a banker to the government and commercial banks.
- The central bank is responsible for monetary policy formulation, inflation control, and financial stability.
Historical Context:
- The establishment of RBI was influenced by the recommendations of the Hilton Young Commission (1926), which advocated for a central bank in India.
- The centralization of banking functions was deemed necessary to address economic challenges during British rule and enhance control over monetary policy.