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Q130 (IAS/2004) Economy › Government Finance & Budget › Government debt management Answer Verified

Consider the following statements: 1. Reserve Bank of India was nationalised 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 the statements given above is/are correct?

Result
Your answer: —  Â·  Correct: D
Explanation

Both statements are incorrect. Statement 1 is wrong: the Reserve Bank of India was established under the Reserve Bank of India Act, 1934 and commenced operations on April 1, 1935, so it was not nationalised on 26 January 1950 [1]. Statement 2 is also incorrect: the RBI acts as the debt manager for the Central and State governments and issues new loans on their behalf, playing the primary operational role in public debt management [2]. The structure of government borrowings includes internal and external debt components and is managed through established debt-management mechanisms rather than being handled exclusively by the Department of Expenditure [3].

Sources

  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.14 RBI and its Functions > p. 65
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Management of Foreign Exchange Reserves > p. 69
  3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
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