Explain the role of Reserve Bank of India and state its functions.
Answers
HEYA ❤️❤️❤️
your answer is.......
Role of Reserve Bank;
The total amount of deposits held by all commercial banks in the country is much larger than the total size of their reserves. If all the account-holders of all commercial banks in the country want their deposits back at the same time, the banks will not have enough means to satisfy the need of every accountholder and there will be bank failures.
The Reserve Bank of India plays a crucial role here. In case of a crisis like the above it stands by the commercial banks as a guarantor and extends loans to ensure the solvency of the latter. This system of guarantee assures individual account-holders that their banks will be able to pay their money back in case of a crisis and there is no need to panic thus avoiding bank runs. This role of the monetary authority is known as the lender of last resort.
Functions:
1. Bank of issuing notes: Reserve bank of India has monopoly rights of issuing notes. This is called currency authority function of central banks. All notes issued by RBI are an unlimited legal tender in India.
2. Banker to the Government: Reserve bank of India is an banker, agent and financial adviser to the government. It manages the account of the government, it buys and sells the securities of the government and it frames policies to regulate the money market.
hope it helps you:-)