He functions in the novel as a mediator, which is demonstrated when the Indians show up at the Verinder country estate performing tricks. He approaches them and begins to speak to them in their native tongue.
He is able to calm the fears of Betteredge and Franklin Blake, who are the only ones at the time who are familiar with the aims of the Indians. For the moment, the threat is not an immediate concern. Later, he explains to Betteredge that the Indian are not performers but Hindu priests in disguise. Through Murthwaite the reader is able to understand the Indians from a well-informed source. We understand that they are not bad people.
He also uses his knowledge of the Indian culture to further the narrative. He explains to Mr. Bruff the reason the chief Indian visited the Bruff residence and asked about the amount of time that elapses before a debt is to paid. He is also used to decipher a coded letter written in Hindustani, as Collins calls it. He explains the attack of Mr. Luker and Godfrey Ablewhite and is the first to suspect Godfrey of the theft of the diamond. In fact, without his help, the mystery would have had too many holes to solve.
At the end of the novel, Mr. Murthwaite returns to the East and becomes an eyewitness to the diamond being placed back in the moon god statue by the three Indians whom he correctly identifed as Hindu priests. He is the only character that fits in whether in India or England. Though an Englishman, he tires of English society and desires to travel to the East. In Murthwaite, Collins expresses his desire for the English to develop a better understanding and appreciation for Indian customs.