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CS Professional · Banking and Insurance - Laws and Practice · Regulatory Framework of Banks

The Central Government constitutes a Local Board for one of the four areas specified in the First Schedule to the Reserve Bank of India Act, 1934. Which of the following correctly describes the composition of that Local Board?

A Local Board has five members appointed by the Central Government. They represent, as far as possible, territorial and economic interests and the interests of co-operative and indigenous banks. They elect their own chairman. It is not nominated by the Governor or elected by shareholders.

  1. AFive members appointed by the Central Government, representing as far as possible territorial and economic interests and the interests of co-operative and indigenous banksCorrect
  2. BSeven members nominated by the Reserve Bank Governor from among scheduled commercial banks
  3. CFive members elected by the shareholders of the Reserve Bank from the area concerned
  4. DThree members appointed by the Central Board together with the Deputy Governor of the area

Explanation

Under section 9 of the RBI Act, a Local Board consists of five members appointed by the Central Government, representing territorial and economic interests and the interests of co-operative and indigenous banks. The members then elect one of themselves as chairman. The other options misstate the number or the appointing authority.

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