Q. Consider the following statements :- The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
- Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in public interest.
- The Governor of the RBI draws his power from the RBI Act.
Which of the above statements are correct? (UPSC Prelims 2021)
Answer:
1 and 3 only
Notes: The correct answer is
[C] 1 and 3 only.
- Statement 1 (Correct): The Governor and Deputy Governors of the RBI are appointed by the Central Government. Under Section 8 of the RBI Act, 1934, the Central Government has the authority to appoint the Governor and not more than four Deputy Governors.
- Statement 2 (Incorrect): There is no provision in the Constitution of India that gives the Central Government the right to issue directions to the RBI. This power is actually derived from Section 7 of the RBI Act, 1934, which states that the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.
- Statement 3 (Correct): The RBI is a statutory body, and its powers, functions, and the authority of the Governor are derived from the Reserve Bank of India Act, 1934. The Governor serves as the Chief Executive Officer and Chairperson of the Central Board of Directors.
While the RBI enjoys functional autonomy, Section 7 of the RBI Act remains a powerful tool for the government, though it was never formally invoked until recent years during specific liquidity and regulatory discussions.