100 years ago: The Indian currency league

1. At a Glance

• The Indian Currency League was a body of Indian businessmen, economists and politicians. In October 1926 it began a public campaign for a rupee–sterling ratio of 1s 4d (1 shilling 4 pence per rupee). It opposed the 1s 6d ratio that the Currency Commission (the Hilton Young Commission) had recommended. [6][2]
• The same Commission recommended setting up a central bank to be called the "Reserve Bank of India". This makes the episode part of the backstory of the RBI. [2]
• Why UPSC should care: it links three areas:
• Modern Indian history: economic nationalism and the role of Indian capitalists.
• Indian economy: the exchange rate, the gold standard and how central banking began.
• Institutional history of the RBI.

2. Why in the News

• The Hindu's "100 Years Ago" archival column (print edition, 13 October 2026, page 11, Chennai) reprinted the dispatch datelined Poona, October 12 [1926] about the League starting its campaign. [6]
• 2026 is the centenary of the Hilton Young Commission's report, which was submitted in July 1926. [2]
• Otherwise a mostly static history topic.

3. Background & Evolution

• Rationale: the Government's effort to hold the rupee at a high exchange rate drew heavy public criticism. Indian interests saw a high rupee as hurting exporters and domestic industry. [4]
• 1924: a proposal to stabilise the exchange ratio was moved in the Legislative Assembly. The Finance Member opposed it but agreed to appoint a commission. [4]
• August 1925: the Hilton Young Commission was set up to review India's exchange and currency system. [2]
• July 1926: the Commission submitted its report. [2]
• It recommended a central bank named the "Reserve Bank of India", holding all central banking functions. [2]
• It proposed gold-convertible notes (convertible into gold bars, i.e., a gold bullion standard). [5]
• It proposed that gold and gold securities form a minimum of 40 per cent of the reserve. [5]

• It adopted 1s 6d as the rupee's sterling ratio. [6][3]

• 12 October 1926 (Poona): the newly formed Indian Currency League held its first public meeting to argue for 1s 4d against the Commission's 1s 6d. [6]

• 25 January 1927: the Gold Standard and Reserve Bank of India Bill, based on the Commission's recommendations, was introduced in the Legislative Assembly. [1]
• 1934: the Reserve Bank of India Act, 1934 was enacted and became the statutory basis of the RBI. [3]
• 1 April 1935: the RBI began operations. [1][3]

4. Core Static Facts

Item	Fact
Commission (popular name)	Hilton Young Commission, also called the "Currency Commission" in contemporary reports [2][6]
Set up	August 1925 [2]
Report	July 1926 [2]
Key institutional recommendation	Central bank named Reserve Bank of India [2]
Recommended ratio	1s 6d per rupee [6]
Ratio wanted by the Currency League	1s 4d per rupee [6]
Gold equivalent of 1s 6d	8.47512 grains of fine gold per rupee, the rupee's external sterling par at the time [3]
Reserve proposal	At least 40% in gold and gold securities [5]
Note convertibility proposed	Into gold bars (bullion) [5]
Bill to implement	Gold Standard and RBI Bill, introduced 25 Jan 1927 [1]
Final statute	RBI Act, 1934 [3]
RBI starts operating	1 April 1935 [1][3]
League's first meeting	Poona, 12 Oct 1926; chaired by N.C. Kelkar [6]
Speakers at that meeting	Sir Purshotamdas (Thakurdas), Sir Victor Sassoon, B.F. Madon, Jamnadas Dwarkadas, Professor (V.G.) Kale [6]

Key terms:

• Ratio controversy: the dispute over the rupee–sterling exchange rate (1s 4d vs 1s 6d).
• External par: the official exchange value of the rupee in terms of sterling.
• Gold bullion standard: notes can be exchanged for gold bars, not gold coins.

5. Multi-Dimensional Analysis

Economic

• An overvalued rupee (1s 6d) made imports cheaper and Indian exports dearer. That hurt Indian exporters, mill-owners and agricultural producers. The League's call for 1s 4d was a call for a more competitive rupee. [6][4]
• The ratio decided how much gold backed each rupee: 8.47512 grains of fine gold under 1s 6d. It was therefore a monetary-standard question, not just a trade question. [3]
• The 40% gold-reserve proposal is an early version of the reserve-backing rules for note issue that later appeared in the RBI Act. [5][3]

Historical / National Movement

• This is an example of economic nationalism. Indian industrialists such as Purshotamdas and Bombay mercantile interests joined politicians such as N.C. Kelkar, a Tilakite, to challenge colonial monetary policy. [6]
• The League's strategy was to educate public opinion through public meetings, as it did in Poona. [6]
• The episode fits the wider "drain" and colonial-economy critique: monetary policy seen as serving British and sterling interests.

Institutional / Governance

• The Commission's report started the process that created a separate central bank. Before this, currency and credit functions were split between the Government and the Imperial Bank. [2]
• It took about 8 years to get from the 1927 Bill to the 1934 Act, showing how slowly the legislation moved and how contested it was. [1][3]

Legal

• The legal chain runs: 1927 Gold Standard & RBI Bill → RBI Act, 1934. The RBI Act remains the RBI's governing statute. [1][3]

6. Recent Developments (last 12–18 months)

• Oct 2026: The Hindu's "100 Years Ago" column revisited the Indian Currency League's 1926 campaign. [6]
• 2026: centenary of the Hilton Young Commission report (July 1926). [2]
• The searches found no other recent government or institutional events on this topic.

7. Prelims Hooks

• The Hilton Young Commission was set up in August 1925 and reported in July 1926. [2]
• The Hilton Young Commission recommended a central bank named the "Reserve Bank of India". [2]
• The ratio recommended by the Currency Commission was 1s 6d per rupee. [6]
• The Indian Currency League campaigned for 1s 4d per rupee. [6]
• The League's first public meeting was at Poona on 12 October 1926, chaired by N.C. Kelkar. [6]
• Sir Purshotamdas and Sir Victor Sassoon were among the League's speakers. [6]
• 1s 6d was equal to 8.47512 grains of fine gold per rupee. [3]
• The Commission proposed notes convertible into gold bars. [5]
• The Commission proposed that gold and gold securities be at least 40% of the reserve. [5]
• The Gold Standard and Reserve Bank of India Bill was introduced on 25 January 1927. [1]
• The RBI was created under the RBI Act, 1934. [3]
• The RBI began operations on 1 April 1935. [1][3]
• A 1924 Legislative Assembly proposal to stabilise the ratio led the Finance Member to agree to a commission. [4]

8. The League's Leader Had Already Dissented Inside the Commission

• Purshotamdas Thakurdas was not just a speaker at Poona. He was a member of the Hilton Young Commission itself [4]
• He wrote a minute of dissent, a formal note of disagreement attached to the report [4].

• So the League's campaign was not outsiders attacking a report. One of the report's own authors was taking his disagreement to the public.

• The 1s 4d demand was not a new idea. It was the rate Indians had asked to lock in two years earlier

• In 1924 the rupee stood at about 1s 4d. Thakurdas wanted to bring a Bill in the Legislative Assembly to stabilise (fix) the ratio at that level [4].
• The Finance Member opposed it and offered a commission instead [4]. That commission became the Hilton Young Commission.

• So in 1926 the League was asking for the rate Indians had wanted fixed in 1924. It was not asking for a cut to some new, lower rate.

• His dissent also covered how the central bank should be built

• Thakurdas said the central bank should grow out of the existing Imperial Bank of India, not be created as a brand-new body [4].

• The disagreement was therefore about the design of India's monetary institutions as well as the ratio.

• Why this matters for an answer: it shows Indian capitalists working inside colonial institutions (commissions, the Legislative Assembly) and then turning to public campaigns when they lost there.

9. Who Gains and Who Loses When the Rupee Is Made Dearer

• The difference of 2 pence changed every exporter's income by about 12.5%
• One pound sterling = 240 pence.
• At 1s 6d (18 pence) per rupee, a £1 sale abroad brings home about 13⅓ rupees. At 1s 4d (16 pence) it brings 15 rupees [6].

• So a jute or cotton exporter earns about 12.5% fewer rupees for the same goods under 1s 6d.

• The same arithmetic runs the other way for imports

• A dearer rupee buys more sterling, so British goods become cheaper in India.

• Indian mills now competed with cheaper imported goods in their own home market. This is why mill-owners and Bombay merchants filled the League [6].

• The farmer is hit even though he never sees a pound

• Indian crops sold abroad were priced in sterling. Fewer rupees per pound means lower rupee prices for the crop.
• But the farmer's land revenue and debts were fixed in rupees. Those did not fall.

• So the farmer earns less but owes the same.

• Anyone who had to pay in sterling gained from 1s 6d

• A dearer rupee means fewer rupees are needed to pay the same sterling bill.
• That is why nationalists saw the ratio as a choice about whose interests come first, not a neutral technical number. It ties into the drain critique in §5.

10. The Best Case for 1s 6d, and Where It Falls Short

• The strongest argument for 1s 6d: changing the rate also has losers
• A cheaper rupee (1s 4d) makes every imported good dearer in rupees. Townspeople and wage earners who buy those goods pay more, and their wages may not rise as fast.
• Fixing a rate different from the one the market already uses forces prices, wages and contracts to adjust. That adjustment hurts too.

• So the government could say 1s 6d was a rate that avoided a fresh shock.

• What that argument gets right

• No exchange rate is neutral. 1s 4d would also have moved money from one group to another, this time from consumers to exporters and producers.

• The League mostly spoke for business and producers. Its demand was not free of class interest.

• Where it falls short

• In 1924 the rupee was about 1s 4d [4]. The 1s 6d "existing rate" had itself come about recently, while India's own legislature was refused the chance to fix the ratio [4].
• Before this, the government had tried to hold the rupee at an even higher 2s, and that attempt drew heavy public criticism [4]. The 1s 6d choice followed the same habit of keeping the rupee high.
• So the real question was not "stability against change". It was who gets to choose the rate. In 1924 the Finance Member, not the Indian legislature, made that choice [4].

11. Why the Ratio Fight Did Not End in 1927

• The ratio came back during the RBI Bill debates
• Even during the later debate on the Reserve Bank Bill, a member, B. Sitaramaraju, moved to cut the ratio to 1s 4d [3].

• So Indian opinion never accepted 1s 6d as settled. The dispute ran for most of a decade.

• The central bank got stuck in constitutional politics

• The Select Committee report on the Reserve Bank Bill drew several minutes of dissent [3].
• The sharpest, signed by 7 members, said the Bill should not go ahead at all because the government's White Paper on constitutional reform had unsatisfactory provisions [3].

• Indian members linked control of the central bank to the bigger question of how much power Indians would have under the new constitution.

• What this means for the "8-year delay" in §5

• The delay was not just slow law-making. Two disputes were tied together: the ratio (whose interests money policy serves) and control of the central bank (who runs it).
• That is a useful line for Mains: the RBI was born out of a fight about sovereignty over money, not only out of a technical design.

12. Anchors for Answers

• Data: 1s 6d vs 1s 4d means about 13⅓ vs 15 rupees per £1 of exports, a gap of about 12.5% in exporters' rupee earnings [6]
• Data: The rupee stood at about 1s 4d in 1924, when a Bill to fix it at that level was proposed and opposed by the Finance Member [4]
• Report/Committee: Hilton Young Commission (Royal Commission on Indian Currency and Finance), 1926, with Purshotamdas Thakurdas's minute of dissent (central bank to grow out of the Imperial Bank) [4]
• Report/Committee: Select Committee on the Reserve Bank Bill, where 7 members dissented and asked that the Bill be dropped because of the White Paper [3]
• Law/Case: Reserve Bank of India Act, 1934, the outcome of the 1927 Gold Standard and RBI Bill [1][3]

13. Mains Relevance

• GS-I: Modern Indian History, under "significant events, personalities, issues". Covers economic nationalism and the role of Indian capitalists in the national movement.
• GS-III: Indian Economy, under "mobilisation of resources" and "monetary policy". Covers the history of the exchange rate and of central banking.
• Possible question stems: 1. The 'ratio controversy' of the 1920s showed how colonial monetary policy and Indian economic nationalism collided. Discuss. 2. Trace how the Reserve Bank of India evolved from the Hilton Young Commission (1926) to the RBI Act, 1934. 3. Exchange-rate policy is never neutral. Examine this with reference to the 1s 6d vs 1s 4d debate in colonial India.

14. Related Topics to Study Next

• RBI Act, 1934 and RBI functions: the direct institutional result of the Commission. [3]
• Imperial Bank of India (1921) → SBI (1955): central-banking roles before the RBI existed.
• Babington Smith Committee (1919) and the 2s rupee: the earlier ratio experiment that came before the 1920s controversy.
• Dadabhai Naoroji's Drain Theory: the intellectual roots of the economic critique of colonial rule.
• Role of Indian business classes, e.g. FICCI (1927): the same industrialists organised economically.
• Gold standard, gold bullion standard and the end of the gold standard (1931): the monetary-standard background.
• RBI nationalisation (1949) and the modern exchange-rate regime (1993 LERMS / market-determined rate): how exchange-rate policy developed later.

15. NCERT Concepts to Revise

• Foreign exchange rate (Economy): The whole controversy was about the rupee–sterling rate, 1s 4d versus 1s 6d, and who it helped or hurt.
• Gold standard (History): The Commission proposed a gold bullion standard, and the ratio fixed how much gold backed each rupee.
• Central bank (Economy): The Commission's key recommendation was a central bank, the Reserve Bank of India, to take over currency and credit functions.
• Economic nationalism (Economy): The League's campaign shows Indian businessmen and politicians challenging colonial monetary policy to protect Indian exporters and industry.
• FICCI (History): Purshotamdas Thakurdas and other League figures went on to found FICCI in 1927, organising Indian business interests.
• Dadabhai Naoroji (History): His drain theory is the intellectual root of the critique that colonial monetary policy served British interests.

16. Common Errors / Trap Areas

• Mixing up the ratios. The Commission (government side) wanted 1s 6d. The Indian Currency League (nationalist and business side) wanted 1s 4d. Aspirants often reverse them. [6]
• Confusing the year of recommendation with the year of founding. The RBI was recommended in 1926 [2], the Act was passed in 1934 [3], and operations began in 1935 [1]. Neither 1926 nor 1934 is the founding year.
• Getting the commission's dates wrong. It was set up in 1925 and reported in 1926. [2]
• Confusing the type of gold standard. The Commission proposed notes convertible into gold bars (bullion), not gold coins. [5]
• Mixing up commissions. The Hilton Young Commission (1925–26) is not the Royal Commission on Agriculture (Linlithgow, 1926–28) and not the earlier Chamberlain Commission (1913–14) on Indian finance.