Question

Consider the following statements :

1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.

2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.

3. The Governor of the RBI draws his natural gas power from the RBI Act.

Which of the above statements is/are correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

Answer 1

Correct Answer - Option 3 : 1 and 3 only

The correct answer is 1 and 3 only.

• The RBI Governors are appointed by the government of India for a fixed time period. Hence statement 1 is correct.
• The Reserve Bank of India was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934.
• RBI is not a constitutional body.
• Hence, nothing is mentioned in the Constitution of India that gives the Central Government the right to issue directions to the RBI in the public interest. Hence statement 2 is incorrect.
• The Governor of the Reserve Bank of India is the Chief Executive Officer of the Central Bank of India and the Ex-officio Chairman of its Central Board of Directors.
• The Governor of the RBI draws his natural gas power from the RBI Act. Hence statement 3 is correct.
• Power and Function of RBI Governor:-
  • ​The RBI governors are responsible for maintaining the monetary stability in an economy.
  • He plays an important role in formulating the policies of the Reserve Bank of India.
  • He has the responsibility for issuing licenses to open new foreign and private banks.
  • The financial system of the nation is regulated and administered by the Governor and he only sets the parameters within which the whole financial system functions.
  • The Governor of RBI manages the external trade and payment also promotes orderly development and maintenance of the foreign exchange market in India which comes under the foreign exchange management act, 1999.
  • RBI Governor also keeps a check on rules and regulations in order to make them more customer-friendly.
  • Through Urban Bank Departments RBI governor leads and supervise primary co-operative banks.
  • RBI Governor also has a part to play in facilitating and monitoring the flow of credit to small scale industries, rural, and agricultural sectors.
  • The responsibility for regulating state cooperative banks, regional rural banks, and various local area banks.