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CS Professional · Banking and Insurance - Laws and Practice · Overview of Indian Banking System

Under the Reserve Bank of India Act, 1934, a Local Board is constituted for each of the four specified areas. Which statement correctly describes its composition and role?

A Local Board has five members appointed by the Central Government, who elect one of themselves as chairman. Its role is to advise the Central Board on matters referred to it and to perform duties the Central Board delegates.

  1. AIt has five members appointed by the Central Government, elects its own chairman from among them, and advises the Central Board on matters referred to itCorrect
  2. BIt has seven members appointed by the RBI Governor, who also acts as its chairman
  3. CIt has five members elected by shareholders, and it directly issues currency notes
  4. DIt has five members appointed by the Central Government, with the chairman nominated by the Central Government, and it supervises all banks in its area

Explanation

Section 9 provides for five members appointed by the Central Government to represent territorial and economic interests and those of co-operative and indigenous banks. The members elect the chairman from among themselves. The Board advises the Central Board and performs delegated duties. The other options misstate appointment, chairman selection or functions.

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