Question

The reserve bank of india (rbi) acts as a bankers bank. What does it mean? (asked in upsc-pre-2012) 1) other banks retain their deposits with the rbi. 2) the rbi lends funds to the commercial banks in times of need. 3) the rbi advises the commercial banks on monetary matters. Answer codes: (a) 2 & 3 only (b) 1 and 2 only (c) 1 and 3 only (d) 1, 2 and 3

Answer 1

Answer:

option d is the right answer

Explanation:

The Reserve Bank of India(RBI), plays a major role in the banking industry in our country. It has many responsibilities such as printing of money, its distribution and many more. Though we have several banks, they all operate under the RBI. Even the private banks get advise from the RBI. Hence all the options mentioned here are right.

Answer 2

The reserve bank of india (rbi) acts as a bankers bank. It means:

1) other banks retain their deposits with the rbi.

2) the rbi lends funds to the commercial banks in times of need.

3) the rbi advises the commercial banks on monetary matters.

Option (d)  

Explanation:

• The banker's bank name is given to RBI because it governs and manages the banks that do business in India. It serves as the bank for all the banks, when the time of need occurs.
• Every bank has to keep a certain deposit with the banker's bank, in order to establish security and also to help pay off their depositors in times of need.
• When emergencies occur, the RBI can provide a fund to the other banks and also provide them with sound monetary advice. Therefore all the facts mentioned in the question are valid for RBI.  

Learn more about RBI:

Supportive organisation of RBI is ​

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RBI restricts money supply do to inflationary pressure. How will RBI use its following instruments -

1) Open market operation.

2) CRR.

3) SLR.

4) Bank rate.

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