Recently, it has been all over the news that the Reserve Bank of India approved Dividend of ₹57,000 Crores to the Government of India. Naturally, many people started asking that whether the Government of India has a status akin to that of a Shareholder and is the Reserve Bank of India a Company?
In
order the understand the above-stated conundrum, it would be apposite to peruse
the scheme of the Reserve Bank of India Act, 1934 (in short, ‘RBI Act’), which is the law
that establishes and governs everything related to the Reserve Bank of India
(in short, ‘RBI’).
Without further ado, Section
3 of the RBI Act talks about establishment and incorporation of the RBI in the
following terms: -
“(1) A
bank to be called the Reserve Bank of India shall be constituted for the purposes
of taking over the management of the currency from the Central Government and
of carrying on the business of banking in accordance with the provisions of
this Act.
(2)
The Bank shall be a body corporate by the name of the Reserve Bank of India, having
perpetual succession and a common seal, and shall by the said name sue and be
sued.”
Thus,
under S. 3 (1), the RBI has been constituted for the purposes of taking over
the management of currency from the Central Government and other related
purposes mentioned under the RBI Act. The wordings of S. 3 (1) are interesting
as it means that the domain of management of currency vests with the RBI and
not the Central Government. Such power of management of currency has been taken
away by S. 3 (1) from the Central Govt. and vested with the RBI instead.
Further,
under S. 3 (2), the RBI is a body corporate having perpetual succession and a
common seal and shall by the same sue and be sued. This is again important to
signify that the RBI is an independent body and its affairs are totally
separate from that of the Central Government.
To
further signify the corporate structure and body of the RBI, the RBI Act in its
S. 4 has also made provision for capital of the Bank just the way it is done for other companies.
Even the management of the Bank has been entrusted to the Board of Directors
under S. 7. Though the Directors and the Governor the Bank are appointed by the
Central Government but apart from it, under the scheme of RBI Act, there seems
to be no other interference of the Central Government in the working of the RBI. Also, under S. 20 and 21, the RBI undertakes banking operations and other related
affairs for the Central Government.
It is
manifestly clear that RBI as an institution is autonomous. However, the scheme
of the RBI Act is such that the role of the RBI is to assist the Central
Government in management of the currency and money and to ensure that the
monetary health of the country as well as the Central Government remain in
sound condition.
Hence,
it would not be an exaggeration to state that the RBI has a corporate structure
and the Central Government i.e. Government of India, though not always a shareholder
but is always a stakeholder in its functioning.
Nice read. Since RBI has declared dividend to government of India and the generally “dividend” means the profit of a company, which is not retained in the business and is distributed among the shareholders in proportion to the amount paid-up on the shares held by them, can we safely assume that Central government of India is a 'shareholder' of the body corporate called RBI ?
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