Viceroys: Lord Reading, Lord Irwin
Two wars, a central bank, and the sterling balances.
Reserve Bank of India (proposal) · 1 July 1926
Hilton Young Commission report submitted, recommending a central bank to be called the Reserve Bank of India with all central banking functions
VerifiedOfficial record. Source: HY1926 ¶¶85–99; RBIH1 ch. 1
Indian currency
Recommended "the establishment of a true gold standard" without gold in circulation: "the ordinary medium of circulation in India should remain as at present the currency note and the silver rupee, and … the stability of the currency in terms of gold should be secured by making the currency directly convertible into gold for all purposes, but … gold should not circulate as money. It must not circulate at first, and it need not circulate ever."
VerifiedOfficial record. Source: HY1926 ¶¶54–57
Rupee-sterling rate
Recommended the rupee-sterling ratio at 1s 6d. RBIH1 records the ratio as fixed at 1s 6d by 1927 and notes that the Commission's recommendation of 1s 6d was endorsed
VerifiedOfficial record. Source: HY1926; RBIH1 ch. 1
Monetary authority
Recommended a central bank with all central banking functions, on the ground of the "inherent weakness" of divided control: "The Government controls the currency. The credit situation is controlled, as far as it is controlled at all, by the Imperial Bank. With divided control, there is likelihood of divided counsels and failure to co-ordinate … The only certain way to secure co-ordination is to concentrate the controls in one hand."
VerifiedOfficial record. Source: HY1926 ¶85ff (quoted in RBIH1 ch. 1)
New central bank
"After considering various alternatives, we suggest that the new bank be called the 'Reserve Bank of India.'"
VerifiedOfficial record. Source: HY1926 ¶92
Central bank capital
"a fully paid up capital of Rs. 5 crores would be sufficient, allowing even for a material expansion of banking in India"; no very great amount of capital, because a large capital creates the incentive to do business that ought to be avoided, and because it is harder to reduce capital later than to raise it
VerifiedOfficial record. Source: HY1926 ¶91
Share allotment
"The Imperial Bank will be called upon to give up to the new Central Bank some of the privileges it now enjoys. It is right, therefore, that the Imperial Bank's shareholders should be given the first opportunity of subscribing for the capital stock of the Central Bank."
VerifiedOfficial record. Source: HY1926 ¶91
Imperial Bank
Rejected converting the Imperial Bank into a central bank: "the benefit of the elaborate and widespread organisation which the Imperial Bank had already built up should not be lost to India and the bank should be left free to attend to its essential task of giving India a network of banking facilities"; India needed "not only a central bank, but a central bank and a great commercial bank". Montagu Norman's evidence: entrusting central banking to the Imperial Bank "would be most undesirable"
VerifiedOfficial record. Source: HY1926 ¶¶86–88; RBIH1 ch. 1
RBI organisation
Recommended embodying ss. 23–26 of the Imperial Bank of India Act 1920 and regulations 43–48 in the RBI's charter, with one change: the Local Board Presidents'/Vice-Presidents' term to be extended from one year to two, and regulation 44(1) (no one to be chosen President or Vice-President twice in succession) to be omitted
VerifiedOfficial record. Source: HY1926 ¶93
RBI governance
Quoted the Brussels (1920) and Genoa (1922) resolutions: "Banks, and especially Banks of Issue, should be free from political pressure, and should be conducted solely on lines of prudent finance." Recommended that Members of the Governor-General's Council and of the Legislature be debarred from the Central Board or from Local Board presidencies
VerifiedOfficial record. Source: HY1926 ¶94; RBIH1 ch. 1
Currency reserves
Recorded the Gold Standard Reserve at £40,000,000 invested in British Treasury bills and other sterling securities; that the Paper Currency Reserve held (30 April 1926) silver coin 77.0, silver bullion 7.7, gold coin and bullion 22.3, rupee securities 57.1, sterling securities 21.0 (Rs crore, total 185.1); and that since April 1923 the Gold Standard Reserve's interest had been credited to revenue instead of to the reserve, and the Paper Currency Act 1920's provision to apply Paper Currency Reserve interest to strengthening the reserve had never been put into operation
VerifiedOfficial record. Source: HY1926 ¶12 and n. (figures of 30 April 1926)
Currency, central banking, the gold-exchange standard
Royal Commission on Indian Currency and Finance, 1926: report, appendices, minutes of evidence taken in India and in London (Vol. V)
VerifiedOfficial record. Source: india.history.resource.109694; 109696; 109695; dli.ministry.17197; in.ernet.dli.2015.128558
