The young Peshwa, Madhav Rao tried his best to reframe the empire in 1761 . Semi-autonomy was granted to the strongest of knights , in a bid to control the vast expanse of the Maratha Confederacy perfectly. Far-flung autonomous states of the Sindhias of Gwalior, the Gaekwads of Baroda, the Holkars of Indore and Malwa, the Pawars of Udgir and the Bhosles of Nagpur came into existence. He restored to some extent the pre-third-Battle of Panipat status quo. He died in 1772, leaving the Maratha Confederacy to his younger brother, Narayan Rao.

The vitiated Raghunath Rao exhibited his true colours. Peshwa Narayan Rao was brutally murdered by the troops of his uncle Raghunath Rao, greedy for power. Although it is said that the orders were actually given by Raghunath`s wife, Anandi Bai for eliminating all hindrances in their way to the fulfillment of blood-smeared aspirations.

To his sheer dismay, the Maratha chieftains under Nana Phadnavis declared the son of Narayan Rao, Madhav Rao Narayan as the Peshwa. Raghunath had no regret for his sins . To gratify his petty self-interests he sought help from the alien British. Both the parties conceded to the clauses of the Treaty of Surat on March 7, 1775. Raghunath accordingly, should add Salsette and Bassein to the British colonial map, while English furnished him with 2,500 men for wars.