Here’s why RBI need to regulate the issue of bank notes and securing monetary stability

The Reserve Bank of India (RBI) was born under unusual circumstances. A need was felt to ‘regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability’. However, in 1929, the world had been hit by an unprecedented economic crisis-the Great Depression. The monetary systems of the world were in disarray. No one was sure what kind of monetary system would be suitable for India. Hence, it was decided to make a ‘temporary provision’ and that temporary provision was the Reserve Bank of India Act, 1934! (the ‘Act’).