The attempts to establish a Central Bank in India took a definite shape, when in 1927 a bill was introduced in the Indian Legislative Assembly, to establish a gold standard currency for British India and constitute a Reserve Bank of India.
Thereafter various attempts were made and thus, the Reserve Bank of India Act was passed in 1934 and the bank began functioning from 1st April 1935.
Later it was decided to nationalize the bank and the Reserve Bank of India (transfer to public ownership) Act was passed in September 1948 under which the ownership of the bank was passed into the hands of the Government of India with effect from 1st January 1949.
At the time of establishment, Reserve Bank was a share holders bank with a capital of 5 crore of rupees divided into shares of Rs.100 each fully paid.
When it was decided to nationalize the Reserve Bank of India, the shares held by private individuals were taken over by the Government by paying compensation at the rate of Rs.118 for every share of Rs.100 held by the shareholders.
The government paid a total compensation of Rs.5.54 crore for the entire shareholdings. The paid up capital of RBI continues to remain at Rs.5.00 crore. It has made a profit of Rs.4483 crore during 1998-99, and of which Rs.4479 crore has been transferred to Central Government.