The Treaty of Salbai was signed on May 17, 1782 by representatives of the Maratha Empire and the British East India Company after long negotiations to settle the outcome of the First Anglo-Maratha War.

Under its terms, the Company retained control of Salsette and acquired guarantees that the Marathas would defeat Hyder Ali of Mysore and retake territories in the Carnatic.

The Marathas also guaranteed that the French would be prohibited from establishing settlements on their territories. In return, the British agreed to pension off their protégé, Raghunath Rao, and acknowledge Madhav Rao Narayan as peshwa of the Maratha Empire. The British also recognized the territorial claims of the Sindhia west of the Jumna River.

The Treaty of Salbai resulted in a period of relative peace between the Maratha Empire and the British East India Company until outbreak of the Second Anglo-Maratha War in 1802. The Bombay Government was extremely hardpressed for money in the year 1781. Several schemes for carrying on the war on a large scale had to be set aside for want of funds. During the next fair season defensive operations continued in the Konkan.

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But the great power of Haidar Ali made peace with the Marathas so important that, at last, on the 17th May 1782 the treaty of Salbai was concluded. One of its chief provisions was the restoration of all territory conquered from the Marathas since the treaty of Purandhar in 1775. This reduced the British possessions in the north Konkan to Bombay, Salsette, and the three small islands of Elephanta, Karanja, and Hog Island.

The treaty was not finally exchanged till the 24th February 1783. Bassein had to be given up, but from Maratha delay in completing the treaty it was not actually transferred till April 1783. Under the treaty of Salbai the Marathas agreed to pay Raghunathrav an allowance. Thus English had to compromise on many fronts and their plan of expansion” in India came to a halt for some time during which Maratha could consolidate themselves.