Madhavrao II was considered the legal heir, and was installed as Peshwa by the Treaty of Salbai[1] in 1782 after First Anglo-Maratha War.

The treaty ended the First Anglo-Maratha War, restored the status quo, and established peace between the two parties for 20 years.

To counter the menace presented by Mysore's Hyder Ali and Tipu Sultan the Peshwa supported the English.

The Maratha-Mysore War ended after the final conflict during the siege of Bahadur Benda in January 1787, and later settled for peace with the kingdom of Mysore, to which Tipu Sultan obliged with the signing of the treaty of Gajendragad in April 1787.

Tipu had to pay an annual tribute of 12 lakhs per year to the Marathas, thus ending hostilities with them, which allowed him to focus on his rivalry with the British.

In 1788, Isma'il Beg, a Persian who served as a general in the Mughal army along with a few hundred Mughal-Rohilla troops led a large-scale revolt against the Marathas, who dominated North India at the time.

He unleashed untold atrocities on the royal family and common populace, slaughtering thousands and looting about 22 Crores.

However, on 2 October 1788, Mahadji Scindia, upon hearing this news, quickly re-assembled his army and captured Delhi, torturing and eventually, killing Ghulam Qadir and restoring Shah Alam II to the throne.

[15] Relief was provided by the ruler, the Peshwa Sawai Madhavrao II, in the form of imposing restrictions on export of grain and importing rice in large quantities from Bengal[16] via private trading,[15] however the evidence is often too scanty to judge the 'real efficacy of relief efforts' in the Mughal period.

Just before his suicide, it is said that in ordering the execution of the despised police commissioner, Ghashiram Kotwal, Madhavrao was able to defy the wishes of Nana for the first time.