Bitcoin is legal in India and is currently unregulated. RBI’s stand is very clear that at the moment. They currently want to understand and learn about the developments of this virtual currency and by no means want to regulate the same at this juncture.
There is no question of the government banning the currency or shutting it down as no single government owns the currency as it is completely decentralised. The only way the currency can be impacted is by shutting down the facility of internet worldwide and you know that it is practically not possible to do so!
To read the article released by the RBI, please refer the link provided below:
http://articles.economictimes.indiatimes.com/2013-08-14/news/41409715_1_bitcoin-gox-virtual-currency