Who was the first Governor of the Reserve Bank of India?

The correct answer is C, 1949. The Reserve Bank of India began as a shareholders' bank and was taken into public ownership on 1 January 1949 under the Reserve Bank (Transfer to Public Ownership) Act, 1948. Since then the entire capital has been held by the Government of India, although the Bank continues to be run by a Central Board under its own Act of 1934.

Option A, 1971, is the year in which the Bank's insurance related subsidiary work expanded and is close to the 1969 bank nationalisation, so it is placed to confuse. Option B, 1956, is the year the Imperial Bank of India became the State Bank of India, which candidates often mix up with this event. Option D, 1935, is the year the Reserve Bank began operations, on 1 April, under the Act of 1934, and is the commonest wrong answer of the four.

The correct answer is B, 1934. The Reserve Bank of India Act, 1934 is the statute that created the Bank and it carries the provisions on the custody and deployment of the country's foreign exchange reserves, which the Bank holds and invests. The day to day dealings of residents in foreign exchange are separately governed by the Foreign Exchange Management Act, 1999, which replaced the older regulation Act of 1973, but the Bank's own reserve management powers flow from its founding Act.

Option A, 1947, is the year of independence and of the earlier foreign exchange regulation law, which makes it tempting. Option C, 1923, is simply too early, as the Hilton Young Commission that recommended the Bank reported only in 1926. Option D, 1971, matches no relevant statute of the Reserve Bank.

The correct answer is D, Reserve Bank of India. Policy rates are announced by the Reserve Bank, and since 2016 the decision is taken by its Monetary Policy Committee of six members under the chairmanship of the Governor. The repo rate is the rate at which banks borrow short term funds from the Bank against government securities, and the reverse repo is the rate at which the Bank absorbs their surplus funds, so both are instruments of the central bank and not of any other body.

Option A, the Ministry of Finance, sets the inflation target in consultation with the Bank and appoints three members of the Committee, but it does not fix the rates. Option B, the State Bank of India, is a commercial bank that borrows at these rates. Option C, the Comptroller and Auditor General, audits government accounts and has no role in monetary policy at all.

The correct answer is A, 1 April 1935. The Reserve Bank of India Act was passed in 1934 and the Bank began work on the first day of April in the following year, with its central office at Calcutta. It was set up as a shareholders' bank on the recommendation of the Hilton Young Commission, and its first Governor was Sir Osborne Smith.

Option B, 1 July 1955, is the day the Imperial Bank of India was reconstituted as the State Bank of India. Option C, 1 January 1949, is the day the Reserve Bank was nationalised, which is a different milestone. Option D, 1 April 1934, mixes the date of commencement with the year of the Act and is the trap that catches candidates who remember the numbers but not which belongs to which.

The correct answer is A, Hilton Young Commission. Formally the Royal Commission on Indian Currency and Finance, it reported in 1926 and recommended that the currency and credit functions then divided between the Government and the Imperial Bank be placed in a single central bank. Its recommendation led to the Reserve Bank of India Act, 1934 and to the opening of the Bank in 1935.

Option B, the Narasimham Committee, reported in 1991 and 1998 on banking sector reform, prudential norms and consolidation, long after the Bank existed. Option C, the Fazl Ali Commission, was the States Reorganisation Commission of 1955 and belongs to polity, not banking. Option D, the Sarkaria Commission, examined Centre State relations in the nineteen eighties. Only the first is a currency and finance body.