Centre must not look upon the Reserve Bank as a cash cow: ex-RBI board member

Prelims level : Banking Mains level : GS II Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
No Set Found with this ID
  • The central government being fiscally dependent on the Reserve Bank of India (RBI) is undesirable,
  • The ₹68,000 crore that the RBI has paid to the government in the form of dividend or interim dividend since July 2018, forms 92% of the Centre’s entire income from dividends from all public sector financial institutions.
  • It means that the Centre looks RBI as a cash cow and start questioning every rupee that the central bank spends.

Fiscal Deficit

  • The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government.
  • A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.

Reserve Bank of India:

  • Reserve Bank of India is the central banking institution, which regulates the monetary policy of the Indian rupee.
  • Under the Reserve Bank of India Act, 1934, RBI was established on 1st April 1935.
  • RBI is not a Commercial Bank.
  • The Central Office of RBI was primarily established in Calcutta and then permanently moved to Mumbai in 1937.
  • RBI is an institution of national importance and the pillar of surging Indian economy.
  • It is a member of IMF.


  • The concept of Reserve Bank of India was conceptually based on the strategies formulated by Dr. Ambedkar in his book named “The Problem of the Rupee – Its origin and its solution”.
  • This central banking institution was established based on the suggestions of “Royal Commission on Indian Currency & Finance” in 1926. This commission was also known as Hilton Young Commission.
  • In 1949 the Reserve Bank of India was nationalized and is a member bank of the Asian Clearing Union.
  • RBI regulates the credit and currency system in India.


  • Monetary Authority
  • Regulator and administrator of the financial system
  • Managing Foreign Exchange
  • Issuer of currency
  • Developmental role


  • Reserve Bank of India is controlled by a central board of directors. The directors are appointed for a 4-year term by the Government of India in keeping with the Reserve Bank of India Act.
  • The Central Board consists of:
  • Governor
  • 4 Deputy Governors
  • 2 Finance Ministry representatives
  • 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi
  • The executive head of RBI is Governor.
  • The Governor is accompanied by 4 deputy governors.
  • The First Governor of RBI was Sir Osborne Smith and the First Indian Governor of RBI was CD Deshmukh.
  • The First women deputy Governor of RBI was KJ Udeshi.
  • The only Prime Minister who was the Governor of RBI was Manmohan Singh.
Share Socially