Question

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

Answer 1

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 Governor, current 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.