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Deficit financing means the government borrows money from the
1. IMF
2. Ministry of finance
3. RBI
4. WTO

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Correct Answer - Option 3 : RBI

The correct answer is RBI.

  • RBI is known as Banker's bank, Banker to the government, so during deficit financing means the government borrows money from the RBI.


  • About RBI: The Reserve Bank of India was established on 1st April 1935.
    • Was established on the recommendation of the Hilton Young Commission.
    • The RBI was nationalized with effect from 1st January 1949.
    • Four local boards of RBI are located in four regions of the country Mumbai, Delhi, Chennai, and Kolkata.
    • The central office was initially established in Calcutta but was permanently moved in 1937 to Mumbai.
    • RBI is headed by the Governorcurrent Governor of RBI is Shri Shaktikanta Das (25th Governor) (as of April 2021)
    • The first Indian Governor of RBI was CD Deshmukh.
    • Functions of RBI:
      • Issue currency,
      • Control credit,
      • Acts as National Clearinghouse.
      • Borrowing to the government.

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