SSC
The Reserve Bank of India was established on:
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Answer: Option B — 1 April 1935
Detailed Solution
The Reserve Bank of India (RBI) is India's central bank. It was set up on 1 April 1935 under the Reserve Bank of India Act, 1934. Its creation was recommended by the Royal Commission on Indian Currency and Finance, also called the Hilton Young Commission (1926). Some of the ideas behind it also came from Dr B.R. Ambedkar's book "The Problem of the Rupee" (1923), which he presented to the commission.
The RBI's central office was first located in Calcutta, but it was permanently moved to Mumbai in 1937. It was originally a privately owned shareholders' bank. It was nationalised on 1 January 1949, under the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, and has been fully owned by the Government of India since then.
The RBI is managed by a Central Board of Directors, headed by the Governor and appointed by the Government of India. The first Governor was Sir Osborne Smith (1935-37), and the first Indian Governor was C.D. Deshmukh (1943-49). Sanjay Malhotra became the 26th Governor in December 2024.
Main functions of the RBI:
Monetary authority: formulating and implementing monetary policy to maintain price stability while keeping in mind growth. Since 2016, policy rates are set by the Monetary Policy Committee.
Issuer of currency: the RBI issues all currency notes except the one-rupee note, which is issued by the Ministry of Finance. Coins are minted by the government and distributed by the RBI.
Banker to the government: it manages the accounts and public debt of the Centre and the states.
Banker's bank: it holds part of the cash reserves of commercial banks and lends to them as the lender of last resort.
Regulator and supervisor of banks and non-banking financial companies.
Manager of foreign exchange under FEMA, 1999, and custodian of foreign exchange reserves.
Regulator of payment systems, such as UPI (run by NPCI).
Why not the other options?
- ✗1 January 1949 is when the RBI was nationalised.
- ✗15 August 1947 is Independence Day.
- ✗1 April 1934 is incorrect; the RBI Act was passed in 1934, but the bank started in 1935.
Quick tip
Remember: RBI = established 1 April 1935 (RBI Act 1934, Hilton Young Commission), nationalised 1 January 1949, headquarters moved to Mumbai in 1937; first Governor Osborne Smith; first Indian Governor C.D. Deshmukh.
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Money, Banking & RBI — Preparation
This question tests your understanding of Money, Banking & RBI, a key topic in the General Knowledge section. The detailed solution above uses a step-by-step approach to show the reasoning, and where available, a shortcut that helps you solve similar questions in under 90 seconds during the actual exam.
This topic covers money and its functions, the banking system in India, the Reserve Bank of India and monetary policy, policy tools such as the repo rate, reverse repo rate, CRR and SLR, bank nationalisation, types of banks, and payment systems such as NEFT, RTGS and UPI. Banking exams test this topic in depth. Questions often ask when the RBI was set up (1935, on the recommendation of the Hilton Young Commission), when it was nationalised (1949), what each policy rate means, and when major banks were nationalised (14 banks in 1969 and 6 in 1980). Current policy rates change often, so check the latest RBI announcements. Practise the money, banking and RBI questions below, written in the style of the general awareness sections of exams such as SSC, banking, railways, CUET GAT, MAH CET and CLAT. Each question comes with a detailed explanation that adds related facts, so every question helps you revise more than one point.