Explained: How The Reserve Bank Of India Governor Is Appointed
From the selection committee, finance ministry to the Prime Minister, here's who does what during RBI governor appointment process.
India¡¯s central bank, i.e the Reserve Bank of India (RBI) is a regulatory body responsible for regulation of the Indian banking system. It falls under the aegis of the Ministry of Finance, Government of India. From the issuance and supply of the Indian rupee, tackling inflation, to acting as banker to the govt, the RBI plays multiple vital roles in the country¡¯s economy.
An equally crucial role is that of the RBI governor, who heads the RBI. The RBI governor has to time and again take a string of vital decisions in the Indian banking system.
But have you ever wondered how the RBI governor gets appointed? Let's decode how it happens.
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The RBI governor is appointed by the Prime Minister¡¯s Office (PMO) on the recommendation of the union finance minister as per Section 8(1)(a) of the Reserve Bank of India Act, 1934.
The Financial Sector Regulatory Appointment Search Committee (FSRASC) usually holds the list of names who get interviewed for the RBI governor post.
Members of FSRASC include the cabinet secretary, RBI governor, financial services secretary and two independent members.
The chosen name from the interviews usually gets sent to the Appointments Committee of the Cabinet headed by the prime minister for final approval. After the final nod by the Appointments Committee of the Cabinet, the appointment is confirmed.
The governor and not more than four deputy governors of the RBI are appointed by the central government under the RBI Act. The governor and deputy governors hold office for periods not exceeding five years. The term of the governor may be fixed by the government at the time of his appointment., and can also be extended.
As per the RBI Act, the central bank should have four deputy governors, i.e. two from within the ranks, one commercial banker and an economist to head the monetary policy department,a PTI report mentioned.
Salaries and allowances of the governor and deputy governors may be determined by the central board, with the approval of the central government.
The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.
It includes Official Directors including the RBI governor and not more than four Deputy Governors, and non-official directors nominated by government, including 10 Directors from various fields and two government officials. Other members of board include four directors, i.e. one each from four local boards constituted for Western Area, Eastern Area, Northern Area and Southern Area, as per RBI.
Reuters
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More About The Rules
The Governor and in his absence the Deputy Governor nominated by him on his behalf, shall also have powers of general superintendence and direction of the affairs and the business of the bank, and may exercise all powers and do all acts and things which may be exercised or done by the bank.
Also, Section 12(1) - (1) states that if the Governor or a Deputy Governor (DG) by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, Deputy Governor nominated by him functions as the Chairman of the Central Board.
Section 7 of RBI Act on management says that subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.
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