Free Press Journal

RBI: An Anecdotal History


The author of the book under review is a Post Graduate in Economics and served in the Reserve Bank of India for forty years in a number of Departments and retired as Deputy General Manager. He is a rare bird—a literary banker. He has to his credit another book “A Bunch of Fragrant Roses.”

The former Deputy Governor of RBI, S S Tarapore wrote that official records do not carry the anecdotal aspects of RBI History and asked the author to prepare a book of anecdotal history. The present works fills that need to a great extent. divided into Five Sections. The First Section gives a brief history of R B I. The next Section furnishes Pen Portraits of 23 Governors of R B I. Sections Three and Five are a cornucopia of anecdotes about distinguished personalities who dominated the Central bank. A solid part of the book contains 27 reviews published by the author. These are books by R B I Executives or on R B I.

The origins of the Reserve Bank of India is traceable to the year 1926 when the Hilton-Young Commission—recommended the creation of a Central Bank for India .The Reserve Bank of India Act of 1934 established the Reserve Bank and set in motion a series of measures that gave birth to operations in 1935. Since then, the Reserve Bank’s role and functions have undergone significant changes keeping pace with the alterations in the complexion of the nation’s economy and its financial sector.

The Preamble to the Reserve Bank of India Act, 1934, under which it was constituted. specifies its objective — “to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage”. Eighty years later, the Bank has taken on different functions keeping pace with altered national interests and global developments. R B I adopted international best practices in areas such as prudential regulation, banking technology, variety of monetary policy instruments, external sector management and currency management .

Since it will notbe possible to cover all the Governors a few are being touched upon. The first Governor. Osborne Smith had a regular battle with the Finance Member Sir James Grigg. There was no love lost with his Deputy Governor James Taylor. Smith’s financial dealings were questioned by his adversaries. Allegations were made of a scandalous liaison with the wife of an RBI Officer. This was “Conduct Unbecoming” of an RBI Governor.

The second Governor Sir James Taylor died on February, 1947, due to cardiac failure. Among the pall bearers was Chintaman Deshmukh. According to Deshmukh, “Sir James Taylor was among the most remarkable man that has been my good fortune to know. His intelligence is like a lambent flame which illumined everything that it touched and purged it of dross and he had a catholicity of interest, a breadth of outlook and a warm humanity which I have seldom seen equalled.”

The third Governor Rama Rau resigned. Accordinbook reviewg to the Reserve Bank History, events in 1956-57 culminated in Rama Rau’s resignation as Governor directly as a result of disagreements with Finance Minister TTK, which erupted into barely concealed conflict late in 1956. According to Rama Rau, TTK behaved towards him with “personal rudeness”, used “very rude language”, passed “rude remarks” and indulged in “rude behaviour”. In Parliament TTK accused the Bank of as being “reserved” and of being “incapable of doing any positive thinking”.

The Emergency era saw the ascension to office of K R Puri. According to the then Finance Secretary M Narasimham, “When H M Patel took over as Finance Minister, almost the first thing that he told me was that the RBI Governor. K.R.Puri had to go. He said this was also the Prime Minister’s express instructions. Puri was persona non grata with the Prime Minister and the Finance Minister as he was reputed to have had close links with what used to be called the extra-constitutional authority during the Emergency and his appointment as governor was regarded as a pure political decision and not based on merit…I would persuade Puri to send in his resignation….As we neared the end of April..I telephoned Puri to come over to Delhi with his resignation letter, which he did and…I took the letter across to Patel”.

Anand Chandavarkar unarguably was the foremost exponent of the Indian economic scene and an acknowledged authority on John Maynard Keynes. He was from the London School of Economics, where he studied under Karl Popper, Michael Oakshott, two political philosophers of world repute. Greater distinction is that he was the disciple of three Nobel Laureates in Economics, Friedrich Hayek, James Meade and Ronald Coase. One cannot have more distinguished teachers. The teachers could not have a more distinguished disciple.
The heaviest part of the book is the Section containing 27 book reviews noted for the graceful style and felicity of expression. RBI brought out a Coffee Table book “Mint Road Milestones” when RBI completed 75 years. This volume is an excellent compendium which is an easy-to-absorb capsule history of our Central Bank and the Indian economy for 75 years with a backdrop of international events. It is a veritable feast to the eyes and rich repast to the brain.

There are also reviews of books by eminent Governors Drs. I G Patel, Rangarajan, Y V Reddy, Bimal Jalan. One gains by reading these reviews knowledge of how the Indian economy evolved over the years and the problems faced by India.

The book is at once entertaining and instructive and affords us a view of the growth of RBI. The book is an impressive addition to central banking literature and gives us a glimpse of the aspects that would normally have been lost to history.