Prior to RBI, all the functions of a central bank were being done by Imperial Bank of India. Imperial Bank of India was established in 1921 via the Imperial Bank of India Act, 1920 which amalgamated three Presidency Banks into one strong bank. ⁣
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Although after amalgamating three Presidency Banks into one larger Bank The Imperial bank of India was constituted but it was functioning like a quasi- central bank where as the prevailing economic conditions particularly regulating Issue of note, money supply, money maintenance, economic policy, Monetary system, payments system and above all for regulating and controlling the banking system in India badly needed a centralized Institution which could function as a central bank of India.⁣
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In 1920, the Royal Commission on Indian Currency and Finance known as Hilton Young Commission was set up. ⁣
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In 1926, this commission recommended that the central bank must be separately created. ⁣
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In 1927, a bill to give effect to the above recommendation was introduced in the Legislative Assembly, but was later withdrawn due to lack of agreement among various sections of people.⁣
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The issue of a separate Reserve Bank was later revived in 1931 by the Indian Central Banking Enquiry Committee. In 1933, the White Paper on Indian Constitutional Reforms recommended the creation of a Reserve Bank. A fresh bill was introduced in the Legislative Assembly. ⁣
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In 1934, the Bill was passed and received the Governor General’s assent. After that, RBI started its operations from April 1, 1935.⁣