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The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following? 1. Other banks retain their deposits with the RBI. 2. The RBI lends funds to commercial banks in times of need. 3. The RBI advises commercial banks on monetary matters. Select the correct answer using the codes given below:

The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following? 1. Other banks retain their deposits with the RBI. 2. The RBI lends funds to commercial banks in times of need. 3. The RBI advises commercial banks on monetary matters. Select the correct answer using the codes given below: Correct Answer 1 and 2 only

The correct answer is 1 and 2 only.

Key Points

  • The central bank is an apex bank that controls the entire banking system of a country. It is the sole agency of note-issuing and controls the supply of money in the economy.
  • It performs the following functions as per the Reserve Bank of India Act, 1934:

1. Banking functions: 

  • The Reserve Bank acts as the Banker, Agent, and Adviser to the Government of India and states. It performs all the banking functions of the State and Central Government and it also tenders useful advice to the government on matters related to economic and monetary policy. It also manages the public debt of the government.
  • It performs the same functions for the other commercial banks as the other banks ordinarily perform for their customers. RBI lends money to all the commercial banks of the country. Hence statements 1 and 2 are correct.

2. Supervisory functions: It supervises other banks and governments into various economic conditions and guides them at the time of inflation or deflation in the economy. 

3. Promotional functions: The central bank also performs promotional functions which include integrating with world economies and maintaining foreign reserves. They represent the country's economy internationally.

Advisory Functions:

  • The RBI is also providing advisory functions to both the Central and State Governments on both financial matters and also on general economic problems.
  • However, the above options are limited, it does not contain all the four function. Therefore, statement 3 is not correct.

Related Questions

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 : 
Which of the following statements are true in context of scheduled banks?
1. All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks.
2. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.
3. Scheduled Commercial Banks in India are categorized into five different groups - SBI, Nationalised Banks, Regional Rural Banks, Foreign Banks and Other Indian Scheduled Commercial Banks in the private sector.
4. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Co-operative Banks.
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Simplify the value of $$\frac{{{\text{0}}{\text{.9}} \times {\text{0}}{\text{.9}} \times {\text{0}}{\text{.9 + 0}}{\text{.2}} \times {\text{0}}{\text{.2}} \times {\text{0}}{\text{.2 + 0}}{\text{.3}} \times {\text{0}}{\text{.3}} \times {\text{0}}{\text{.3}} - {\text{3}} \times 0.9 \times {\text{0}}{\text{.2}} \times {\text{0}}{\text{.3}}}}{{{\text{0}}{\text{.9}} \times {\text{0}}{\text{.9 + 0}}{\text{.2}} \times {\text{0}}{\text{.2 + 0}}{\text{.3}} \times {\text{0}}{\text{.3}} - 0.9 \times {\text{0}}{\text{.2}} - {\text{0}}{\text{.2}} \times {\text{0}}{\text{.3}} - 0.3 \times 0.9}} = ?$$
With reference to the period of colonial rule in India, "Home Charges" formed an important part of the drain of wealth from India. Which of the following funds constituted "Home Charges"? 1. Funds used to support the India Office in London. 2. Funds used to pay salaries and pensions of British personnel engaged in India. 3. Funds used for waging wars outside India by the British. Select the correct answer using the codes given below:
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