Before India had its own central bank, the normal tasks that are carried out by the institution were largely undertaken by the Imperial Bank of India. The Imperial Bank of India was formed in Bombay (present day Mumbai) by merging the three Presidency banks on January 27, 1921. The idea of a central bank for British India was based on the recommendations of the Royal Commission on Indian Currency and Finance or the Hilton-Young Commission in 1926; the Reserve Bank of India opened its doors in Kolkata on April 1, 1935. Like the Bank of England, the Reserve Bank of India was initially owned by private shareholders; 99.56 percent of the shares were privately held, while the remaining 0.44 percent were held by the central government. It was nationalized on January 1, 1949, shortly after India’s independence. The bank’s activities are supervised by the Central Board of directors; the powers of the central government of India supersede those of the board. The country is split into four Reserve Bank of India regions or zones: Chennai, Kolkata, Mumbai and New Delhi, while the Reserve Bank is administratively divided into 34 departments. The monetary policy tools of the central bank include setting the interest rate (called the repo rate) and setting the cash reserve ratio and the statutory liquidity ratio. Since the financial crisis of 1991, the role of the bank has shifted to being the issuer of currency, maintaining the accounts of the scheduled commercial banks, regulating the country’s financial system and managing the foreign exchange market. While the Reserve Bank of India has gained a certain degree of autonomy in the post-liberalization period, it has largely stood out from the general global trend of the granting of greater legal independence to central banks.
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