You may be well aware that a tussle was going on between the Central Bank i.e. RBI and the Central government. Only the two things that come to our mind when we think about it. The first one is Section 7 of RBI Act and the second one is……??? Guess what…..??? Yes, you are right, it is the Central Board of RBI. Before we start, keep in mind that the central board of RBI comes under Section 8 of the RBI Act.
Section 7 of RBI Act
Section 7 is related to the management of the Reserve Bank of India. It empowers the central government to issue directions from time to time to the central bank. The directions issued should be in the public interest and can be issued after consultations with the Governor of RBI.
Till now Section 7 has not been invoked by the central government since the establishment of the RBI Act. But if it is invoked then it empowers the central board of the RBI to exercise all the powers which can be exercised by the central bank. Remember that if the central government invoked Section 7 and issues any directions to the RBI, then it will also be held responsible for the damages caused if any.
Section 8 of RBI Act
Section 8 of RBI Act related to the composition of the central board of RBI and terms of the directors. The affairs of the RBI are governed by the central board of directors. There can be a maximum of 21 members in the central board of RBI, but currently, the number is 18. The members of the central board are appointed by the central government as per the RBI Act, 1934. The appointment is done for a period of four years.
The Composition of the central board of RBI is as follows:
- Official Directors
- Non-Official Directors
1). Official Directors
Official Directors are full-time members of the central board. It includes the Governor and not more than four Deputy-Governors of RBI as shown below.
2). Non-Official Directors
The other members which are Non-Official Directors are as:
- Ten Directors from various fields and two government officials which are nominated by the central government.
- Other four are one each from four local boards of RBI.
Currently, the Non-Official Directors are as:
- Dr Prasanna Kumar Mohanty
- Shri Dilip S. Singhvi
- Ms Revathy Iver
- Professor Sachin Chaturvedi
- Shri N. Chandrasekaran
- Shri Bharat Narotam Doshi
- Shri Sudhir Mankad
- Dr Ashok Gulati
- Shri Manish Sabharwal
- Shri Satish Kashinath Marathe
- Shri Swaminathan Gurumurthy
- Shri Subash Chandra Garg
- Shri Rajiv Kumar
Other Important Points under Section 8 of RBI Act
- The Governor and Deputy Governors shall devote their whole time to the affairs of the Bank, and shall receive such salaries and allowances as may be determined by the Central Board. It should also be approved by the central government.
- The central board may permit the Governor or a Deputy Governor to undertake any part-time honorary work which may be related to related to the purposes of the RBI Act or not. The honorary work should not likey to interfere in their duty as Governor or Deputy Governor. Remember that this honorary work can be undertaken only at the request of the central government or any state government.
- The central government may appoint a Deputy Governor as the chairman of National Bank in consultations with the RBI.
- A Deputy Governor may take part in any of the meetings of the central board but is not entitled to vote.
- If the Governor of RBI is not available and authorises a Deputy Governor to take part in the meeting of the central board, then the Deputy Governor is authorised to vote on behalf of the Governor.
- A retiring director of the central board is eligible for re-nomination.