Prelims 2021

Q. 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 public interest.
3.The Governor of the RBI draws his power from the RBI Act.

Which of the above statements are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Correct Answer: c) 1 and 3 only

Question from UPSC Prelims 2021 GS Paper

Explanation : 

Appointment and Powers of the RBI Governor

The correct answer is “1 and 3 only” because:

Statement 1: Appointment by the Central Government

The Governor of the Reserve Bank of India (RBI) is indeed appointed by the Central Government. This is in accordance with the provisions of the Reserve Bank of India Act, 1934. The RBI Act specifies the terms of office, conditions of service, and the procedure for appointment of the Governor.

Statement 2: Constitution and the Central Government’s Rights

This statement is incorrect. The Constitution of India does not specifically give the Central Government the right to issue directions to the RBI. The RBI is an autonomous body and operates independently, though it does work in close coordination with the government on various matters of national interest. However, the RBI Act contains provisions that allow the Central Government to give directions to the RBI after consultation with the Governor of the RBI in matters of public interest.

Statement 3: Powers Derived from the RBI Act

The Governor of the RBI does draw his powers from the RBI Act, 1934. The Act outlines the functions, powers, and the role of the RBI Governor.

Therefore, statements 1 and 3 are correct, making “1 and 3 only” the right choice.

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