Question

Which section of the RBI Act empowers the Central Government to supersede the RBI board and issue directions considered to be ‘necessary in public interest’ to the RBI, after consulting the Governor of the bank?
1. Section 5
2. Section 1
3. Section 3
4. Section 7

Answer 1

Correct Answer - Option 4 : Section 7

The correct answer is Section 7.

 

• According to Section 7 of the RBI Act, the central government may from time to time give such directions to the RBI as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.
• This implies that the government can invoke the Section 7 to get the central bank to take decisions on matters where it would otherwise be reluctant.

 

• Reserve Bank of India Act 1934 is the legislative act under which the Reserve Bank of India was formed.
• This act along with the Companies Act, which was amended in 1936, was meant to provide a framework for the supervision of banking firms in India.
• There is a total of 61 sections in the Reserve Bank of India Act 1934.

 

• Section 5 of the RBI defines banking process, banking company and banking policy .
• Section 3 in The Reserve Bank of India Act, 1934 states that "A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the Central Government and of carrying on the business of banking in accordance with the provisions of this Act."
• Section 1 of the RBI act mentions the Short title, extent, and commencement of RBI.