Establishment of the Imperial Bank of India

The Imperial Bank of India was the centralised authority overall fiscal activities in colonial India, established on January 27, 1921. It was formed from a merger of previously existing banks of Bombay, Madras and Bengal. The Reserve Bank of India replaced the Imperial Bank in 1935.

A receipt for payment from 1937; Source: Pinterest

As authoritative as the name sounds, the Imperial Bank of India was founded on January 27, 1921, as the superior amalgamation of the previously existing colonial banks in India. Its function was to centralise the commercial and other bank-related activities in India. Thus, the banks of the important presidencies under British India – the Bank of Bengal, the Bank of Madras and the Bank of Bombay were unified to form the Imperial Bank of India by Jonathan Maynard Keynes, the renowned economist.

He worked with the English administration and his macroeconomics theories were greatly appreciated during the Great Depression of the 1920s. Keynes’ work was influenced by great thinkers such as Adam Smith and David Ricardo.

Although the Imperial Bank held a fundamental role in assisting the British administration of fiscal responsibilities in India, the bank was owned by the shareholders of the owners of the merged presidency banks of Bengal, Madras and Bombay.

Of these three banks, the Bank of Calcutta was the oldest, established in 1806, and renamed as the Bank of Bengal in 1809. The Bombay and Madras banks were established much later, in the 1840s.

Initially, the British government was not entitled to the profits secured by the Imperial Bank. The Imperial Bank merely acted as an agent of fiscal regulation in British India, not as a part of the government. It had a panel of senior executive members, who made critical decisions such as controlling the flow of currency in the nation at any given point etc.

The Imperial Bank of India ceased to function as an auxiliary organ of the British administration in India with the foundation of the Reserve Bank of India in 1935. Post-1935, the Imperial Bank of India continued to work in a commercial capacity. However, the reorganisation of fiscal responsibilities which was required after India achieved its independence, led to the establishment of the State Bank of India in 1955, which serves as the main state-owned commercial bank in contemporary India, regulated (like all other banks) by the Reserve Bank of India (RBI).