In 1926 the Royal Commission (young Hilton Commission) on Indian Currency and Finance recommended RBI. In 1927 bill was introduced but failed. In 1933 Bill was again introduced and passed in 1934 and the RBI Act, 1934 came into the picture. On 1st April 1935 it was established in Kolkata. Later in 1937, it was shifted to Bombay. RBI worked for Myanmar and Pakistan till 1947. RBI was nationalized on 1st Jan, 1949.

Reserve Bank of India being an apex court of the center enjoys enormous power and functions under banking system in India. It has monopoly over the issue of bank-notes and monetary system of the country. These power and functions as to issue of bank notes and currency system are governed by the Reserve Bank of India Act, 1934. Besides it the Banking Regulation Act, 1949 also empowers certain power and Function of the Reserve Bank.

Functions
There are three types of functions:
Main functions:

• Issue and printing of currency
  The RBI has the sole right or authority or monopoly of issuing currency notes except one rupee note and coins of smaller denomination. The 2 Rs. Note to 2000 Rs note are printed by RBI and signed by Governor of India. 1 Rs note is printed by Governor of India and signed by the finance secretary and all coins are signed by Governor of India and signed by nobody.These currency notes are legal tender issued by the RBI. The RBI has powers not only to issue and withdraw but even to exchange these currency notes for other denominations. It issues these notes against the security of gold bullion, foreign securities, rupee coins, exchange bills and promissory notes and government of India bonds.
   
• Currency circulation
  Either 1 Rs. Note and all coins printed by GOI or 2Rs to 200 Rs note printed by RBI, goes to RBI. RBI circulates them to various commercial banks and then it goes to customers. The bank and customer form the financial market. From RBI to market, the currencies circulate through the RBI. GOI cannot inject the currency directly to the market. This injection of all types of currencies is called currency circulation.
   
• Banker's bank
  RBI guides, helps and directs other commercial banks of the country. RBI keeps control the bank reserves. Every commercial bank has to maintain a part of their reserves with RBI which is called Cash Reserve. If bank need fund they approach to RBI for fund and RBI lend to them.
   
• Government's bank
  The RBI being the apex monitory body has to work as an agent of the central and state governments. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level. It maintains government accounts, provides financial advice to the government. It manages government public debts and maintains foreign exchange reserves on behalf of the government. It provides overdraft facility to the government when it faces financial crunch.
   
• Lender of Last resort
  The RBI being an apex monitory institution has obligatory powers to guide, help and direct other commercial banks in the country. The RBI can control the volumes of banks reserves and allow other banks to create credit in that proportion. Every commercial bank has to maintain a part of their reserves with its parent's viz. the RBI. Similarly, in need or in urgency these banks approach the RBI for fund. Thus, it is called as the lender of the last resort.
   
• Regulatory and supervise bank
  The RBI has been endowed with vast powers for supervising the banking system in the country. It has powers to issue license for setting up new banks, to open new branches, to decide minimum reserves, to inspect functioning of commercial banks in India and abroad, and to guide and direct the commercial banks in India. It can have periodical inspections an audit of the commercial banks in India.

Promotional / Developmental functions
Some of the major development functions of the RBI are maintained below:

1. Development of the Financial System
   The financial system comprises the financial institutions, financial markets and financial instruments. The sound and efficient financial system is a precondition of the rapid economic development of the nation. The RBI has encouraged establishment of main banking and nonbanking institutions to cater to the credit requirements of diverse sectors of the economy.
    
2. Development of Agriculture
   In an agrarian economy like ours, the RBI has to provide special attention for the credit need of agriculture and allied activities. It has successfully rendered service in this direction by increasing the flow of credit to this sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC) to look after the credit, National Bank for Agriculture and Rural Development (NABARD) and Regional Rural Banks (RRBs).
3. Provision of Industrial Finance
   Rapid industrial growth is the key to faster economic development. In this regard, the adequate and timely availability of credit to small, medium and large industry is very significant. In this regard the RBI has always been instrumental in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI and EXIM BANK etc.
    
4. Provisions of Training
   The RBI has always tried to provide essential training to the staff of the banking industry. The RBI has set up the bankers' training colleges at several places. National Institute of Bank Management i.e NIBM, Bankers Staff College i.e BSC, and College of Agriculture Banking i.e CAB are few to mention.
5. Collection of Data
   Being the apex monetary authority of the country, the RBI collects process and disseminates statistical data on several topics. It includes interest rate, inflation, savings and investments etc. This data proves to be quite useful for researchers and policymakers.
    
6. Publication of the Reports
   The Reserve Bank has its separate publication division. This division collects and publishes data on several sectors of the economy. The reports and bulletins are regularly published by the RBI. It includes RBI weekly reports, RBI Annual Report, Report on Trend and Progress of Commercial Banks India., etc. This information is made available to the public also at cheaper rates.
7. Promotion of Banking Habits
   As an apex organization, the RBI always tries to promote the banking habits in the country. It institutionalizes savings and takes measures for an expansion of the banking network. It has set up many institutions such as the Deposit Insurance Corporation-1962, UTI-1964, IDBI-1964, NABARD-1982, NHB-1988, etc. These organizations develop and promote banking habits among the people. During economic reforms it has taken many initiatives for encouraging and promoting banking in India.
    
8. Promotion of Export through Refinance
   The RBI always tries to encourage the facilities for providing finance for foreign trade especially exports from India. The Export-Import Bank of India (EXIM Bank India) and the Export Credit Guarantee Corporation of India (ECGC) are supported by refinancing their lending for export purpose.
9. Supervisory Functions of RBI
   The reserve bank also performs many supervisory functions. It has authority to regulate and administer the entire banking and financial system.
   
   Some of its supervisory functions are given below:
   1. Granting license to banks: The RBI grants license to banks for carrying its business. License is also given for opening extension counters, new branches, even to close down existing branches.
   2. Bank Inspection: The RBI grants license to banks working as per the directives and in a prudent manner without undue risk. In addition to this it can ask for periodical information from banks on various components of assets and liabilities.
   3. Control over NBFIs: The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. However, RBI has a right to issue directives to the NBFIs from time to time regarding their functioning. Through periodic inspection, it can control the NBFIs.
   4. Implementation of the Deposit Insurance Scheme: The RBI has set up the Deposit Insurance Guarantee Corporation in order to protect the deposits of small depositors. All bank deposits below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit Insurance Scheme in case of a bank failure.

Conclusion
Reserve Bank of India is the central bank of India which plays important role for the banking industry, development and growth of economy. From formulating policies, issuing currency to monetary stability in and maintenance of such monetary stability is the duty of RBI. It plays the parent role to the commercial banks and other banking institutions.