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?

Answer: C. Statements 1 and 3 are correct; Statement 2 is wrong. Statement 1 is CORRECT. The GOVERNOR OF THE RBI is APPOINTED BY THE CENTRAL GOVERNMENT. Under Section 8(1)(a) of the RBI Act, 1934, the Governor and Deputy Governors are appointed by the Central Government for a term not exceeding five years (reappointment permitted). The Appointments Committee of the Cabinet, on the recommendation of a Financial Sector Regulatory Appointments Search Committee, selects the Governor. Statement 2 is WRONG. The CONSTITUTION OF INDIA CONTAINS NO PROVISIONS giving the Central Government a right to issue directions to the RBI. The RBI is a STATUTORY body created under the RBI Act 1934, NOT a constitutional body. The power of the Central Government to issue directions to the RBI 'in public interest' comes from SECTION 7(1) of the RBI Act, NOT the Constitution. (Section 7 has historically been a contested provision and has rarely been invoked formally.) Statement 3 is CORRECT. The Governor's powers and functions are CONFERRED BY THE RBI ACT, 1934 (especially Sections 7, 8, 17, 22 etc.) and the Banking Regulation Act 1949. The Governor's authority is statutory. The trick is statement 2's word 'Constitution' — many candidates confuse the constitutional status of CAG (Article 148) with the statutory status of RBI. Source: RBI Act 1934 / Reserve Bank of India website / Constitution of India.