UPSC Prelims 2004 Q130: Indian Economy – Banking & Financial Sector
Consider the following statements:
1. Reserve Bank of India was nationalized on 26 January 1950.
2. The borrowing programme of the Government of India is handled by the Department of
Expenditure, Ministry of Finance.
Which of these statements given above is/are correct?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (d) Neither 1 nor 2
Explanation
Reserve Bank of India and government borrowing
| Statement | Verdict |
|---|---|
| 1. RBI nationalised on 26 January 1950 | False: it was nationalised on 1 January 1949 |
| 2. Borrowing programme handled by the Department of Expenditure | False: it is handled by the Reserve Bank of India with the Department of Economic Affairs, not the Department of Expenditure |
Neither statement is correct.
Answer: (d) Neither 1 nor 2.
Why each option is right or wrong
- (a) Incorrect. RBI was nationalised on 1 January 1949.
- (b) Incorrect. Borrowing is not handled by the Department of Expenditure.
- (c) Incorrect. Both statements are false.
- (d) CORRECT. Neither statement is correct.
Key point
RBI: set up 1935, started 1 April 1935, nationalised 1 January 1949.
Remember
RBI was nationalised on 1 January 1949.
Common mistakes
- Taking 26 January 1950 as the date, the Republic Day.
- Linking borrowing with the Department of Expenditure.
- Mixing the RBI's founding and nationalisation dates.
Exam tip
RBI is the debt manager of the Government of India.
Sources
- Reserve Bank of India Act, 1934
- Reserve Bank (Transfer to Public Ownership) Act, 1948
- Reserve Bank of India — History: nationalisation of the Reserve Bank on 1 January 1949