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Set up at the turn of the century, the library has a distinguished collection of rare Arabic and Persian manuscripts, It also contains the only books rescued from the plunder of the University of Cordoba in Spain. It is one of the national libraries of India.

Originally established in 1891, the Khuda Bakhsh Oriental Library was set up by khuda Baksh Khan, as a public library, out of his family collection of manuscripts.

It has been declared as an institution of national importance in 1969 by an act of parliament. The library has a rich collection of over 18,000 Arabic and Persian manuscripts and over 2,000 Mughal and Rajput paintings, besides 1,70,000 printed books. More than 850 audio and 550 video tapes of eminent persons have been prepared. It brings out a quarterly research journal. The library has published critical editions of 64 rarities.

The library has instituted a few fellowships at par with UGC. It has been recognized by seven universities as a centre of research, for awarding the degrees of Ph.D. and D. lit. The library has also instituted a prestigious prize, which carries an amount of Rs 1 lakh and a citation.

The Library also possesses a sizeable number of original letters of eminent persons written during their lifetime. It is now managed by a Board, headed by the Governor of Bihar.