Previous Year Question
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?
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
Correct Answer: C
Detailed Solution
Statement 1 is correct.
Under Section 8 of the Reserve Bank of India Act, 1934, the Central Board of the RBI may include one Governor and not more than four Deputy Governors. The Governor and Deputy Governors are appointed by the Central Government.
They are full-time officials. Their term is determined by the Central Government but cannot exceed five years at a time. They are eligible for reappointment.
Statement 2 is incorrect.
The Central Government’s power to issue directions to the RBI in public interest does not originate from the Constitution of India. This power is provided by Section 7(1) of the Reserve Bank of India Act, 1934.
Section 7 authorises the Central Government, after consultation with the RBI Governor, to issue such directions to the Bank as it considers necessary in public interest.
Therefore, the statement is incorrect because it identifies constitutional provisions, rather than the RBI Act, as the source of this power.
Statement 3 is correct.
The powers and responsibilities of the RBI Governor primarily originate from the RBI Act, 1934. Section 7(2) entrusts the general superintendence and direction of the RBI’s affairs and business to the Central Board of Directors.
Under Section 7(3), the Governor—and in the Governor’s absence, the nominated Deputy Governor—possesses powers of general superintendence and direction over the affairs and business of the RBI. The Governor may exercise the powers and perform the functions that may be exercised or performed by the Bank.