In order to control inflation and ensure stability in money market :
The RBI’s board of governors shall abide by the government directive.
The Reserve Bank of India is the monetary authority, but it is a statutory body under the RBI Act, 1934 and is not fully independent of the government.
Section 7(1) of the RBI Act empowers the Central Government, after consultation with the Governor, to give such directions to the Bank as it considers necessary in the public interest. Once such a direction is issued, the Bank's governing board (the Governor and the Central Board) is bound to follow it; it cannot refuse.
Hence the claim that the RBI acts independently and can refuse a government directive is wrong. Day-to-day monetary operations to control inflation and keep the money market stable are carried out by the RBI itself, not by the Ministry of Finance, so it is not a department working under the ministry; and the board of directors runs its affairs only subject to the directions the government may give.
Therefore, in controlling inflation and stabilising the money market, the RBI's top management is bound to abide by the government directive.
Hence, the answer is The RBI’s board of governors shall abide by the government directive..
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