Question

The Reserve Bank of India (RBI) acts as a banker’s bank. This would imply which of the following ?

1. Other banks retain their deposits with RBI

2. The RBI lends funds to the commercial banks in times of need

3. The RBI advises commercial banks on monetary matters

Select the correct answer using the code given below : 

1. 2 and 3 only
2. 1 and 2 only 
3. 1 and 3 only
4. 1, 2 and 3 

Answer 1

Correct Answer - Option 4 : 1, 2 and 3 

The correct answer is 1, 2 and 3.

• Reserve Bank of India is the Central Bank of India.

• It is also called a banker’s bank. It is responsible for issuing Indian currency and managing its flow in the market.
• The commercial banks of the country have to retain some amount of deposit with the Reserve Bank of India which will be lent to them at the time of emergency.
• If the commercial banks run short of money then RBI lends it in the form of a loan.
• RBI also advises banks on money matters so that they function properly and maintains a good base in the market.