RBI - GOVERNOR

The appointment of the Governor of RBI is made as per the provisions of the Reserve Bank of India Act, 1934. The Governor of Reserve Bank of India plays an important role in steering and chalking out India's economic course. The Governor's role involves overseeing the Monetary Policy of the country and ensuring price stability through inflation control measures. Additionally, he supervises commercial banks, ensuring their stability, and maintaining the overall financial health of the banking sector. The RBI Governor is a crucial figurehead in the policymaking aspect, representing India in international financial forums and giving India's perspective in global economic discussions. These have a direct bearing on the investment climate, economic growth, and financial stability of the country making the role instrumental in shaping India's economic trajectory.

In 1926 the Hilton Young Commission (Royal Commission on Indian Currency and Finance) recommended creation of a central bank for the Indian Colony. The idea to have a central bank for India became a reality in 1934 when the Reserve Bank of India Act received approval from the Governor General of India. The Reserve Bank commenced its operations from 1934 as India's Central Bank at this stage the Indian Reserve Bank was a Shareholders Bank and in 1949 the Government of India Nationalised the Reserve Bank of India under the Reserve Bank (Transfer of Public Ownership) Act of 1948.

The RBI was established by the Reserve Bank of India Act of 1934, and RBI started its operations from 01.04.1935 onwards. Before becoming the Central Bank of India, Reserve Bank of India ("RBI") was operated as a "Shareholders Bank", the Central Government took over the ownership of the bank through Reserve Bank (Transfer of Public Ownership) Act 1948. The Central Office or HeadQuarters of RBI was initially at Kolkata. In 1937 it was permanently moved to Mumbai.

RBI is managed by a Central Board of Directors with 4 local boards at Mumbai, Delhi, Calcutta and Chennai. It has One Governor and 4 Deputy Directors; the Central Board of Directors has 15 members.

The Preamble to the RBI Act 1934, lays down functions and objectives of RBI in the following manner:

• Currency: To regulate the issue of Bank notes; and operate the currency and credit system of the country to its advantage; and
• Monetary Stability: To have a modern monetary policy framework to meet the challenge of an increasingly complex economy,
• Maintain Reserves: Keeping of reserves with a view to securing monetary stability in India; and
• Price Stability: to maintain price stability while keeping in mind the objective of growth.

RBI is an independent Institution with freedom to take its own decisions.

RBI Act merely states that the Central Board shall consist of: a) a governor; and b) not more than 4 Deputy Directors; who are to be appointed by the Central Government.

• The Financial Sector Regulatory Appointment Search Committee ("FSRASC") prepares a list of names of eligible persons to hold the office of Governor of RBI.
• Composition of FSRASC: It consists of Cabinet Secretary, Current RBI Governor, Financial Service Secretary and Two Independent Members.
• The Shortlisted persons are then interviewed which are then sent to the Cabinet Committee on Appointments (headed by the Prime Minister), the Committee then selects the Governor by confirming his/her appointment.

TENURE: 5 years OR a term which the Central Government may fix while appointing them. The tenure of a Governor of RBI can also be extended by the Central Government.

5 years OR a term which the Central Government may fix while appointing them. The tenure of a Governor of RBI can also be extended by the Central Government.

• Custodian of the Indian Reserves
• Heads the Monetary Policy Committee which oversees the implementation and monitoring of the monetary policy of the Country.
• All currency issued in India, is issued with an undertaking given by the Governor of RBI, verifying the currency as legal tender
• Monitor and facilitate flow of credit to rural, agricultural and MSME sectors
• Frame policies on priority sector lending
• Control and spearhead operations under the Foreign Exchange Management Act of 1999 which ensures control of foreign exchange rate
• The Office of the Governor of RBI controls all the Scheduled banks in the Country
• Heads different Committees of RBI like Technical Advisory Committee of the RBI

Setup under the RBI Act, is headed by the RBI Governor.

• Objective: The MPC, responsible for determining the policy repo rate to achieve inflation targets. It is required to meet at least four times a year with a quorum (quorum: the smallest number of people that must be at a meeting before it can make official decisions) of four members.
• Voting: Each member has one vote, and in case of a tie, the Governor has a casting vote. Additionally, each MPC member provides a statement justifying their vote on proposed resolutions.
• Members: there are six members of the Committee, three are from RBI (RBI Governor, Deputy Governor and RBI official appointed by Central Board of RBI). The External Members are appointed by the Central Government.
• Tenure: Members are appointed to serve a term of four years or until further orders.

RBI governor, appointed under the Reserve Bank of India Act, 1934, for a period of 5 years, plays a pivotal role in shaping India's economic trajectory. The Governor is responsible for overseeing monetary policy, ensuring price stability, and supervising the banking sector's health, the governor's influence extends internationally, representing India in global economic discussions.

Governor of the Reserve Bank of India stands as a linchpin (linchpin: someone that serves to hold together parts or elements that exist or function as a unit) in the nation's economic landscape, playing a multifaceted role in price stability and monetary stability of the country which are crucial for sustained growth. The Governor shapes and sets the trajectory of India's economic journey and sustainable growth of the nation.