How the Reserve Bank of India was set up, and how its central board is composed

Background

Every policy announcement that moves Indian interest rates comes from the Reserve Bank of India, whose own website records that it was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Kolkata but was permanently moved to Mumbai in 1937; the Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, the Reserve Bank has been fully owned by the Government of India since nationalisation in 1949. The Bank's affairs are governed by a central board of directors appointed by the Government of India in keeping with the Reserve Bank of India Act, for a period of four years. Its official directors are the full-time Governor and not more than four Deputy Governors. The non-official directors nominated by the Government are ten directors from various fields and two government officials. The Preamble of the Reserve Bank describes its basic functions as regulating the issue of bank notes and keeping reserves with a view to securing monetary stability in India, and having a modern monetary policy framework to maintain price stability while keeping in mind the objective of growth.