Central banking is a recent phenomenon mainly related to 19th and 20th centuries, although certain central banking functions were performed by certain institutions in the olden days. The growth of central banks has been very slow. The Riks Bank of Sweden is the earliest bank established in 1656.

The Bank of England, though founded in 1694, started functioning as the central bank with the passing of the Bank Charter Act, 1882. Other major countries which established central banks in the 19th century are France (1800), Netherlands (1814), Russia (1860), Germany (1875), Japan (1882), etc.

The movement of central banking started in the 20th century, particularly after the International Financial Conference meeting at Brussels in 1920 which suggested the opening of central banks in all countries. It gained momentum after the establishment of Interna­tional Monetary Fund in 1947. The Federal Reserve system in the U.S.A. was established in 1913 and the Reserve Bank of India in 1935.

Today, there is hardly any country which does not have a central bank. Initially, the central banks were privately owned and privately managed joint stock banks. However, now, particularly after World War II, most of the central banks have been nationalised or have been set up as state-owned institutions.