Question

Which of the following statements regarding the role of Reserve Bank of India is are correct?

1. There is both right and obligation on the Reserve Bank of India to act as a banker to both central and state governments.
2. RBI is a banker to each and every state government in India except Sikkim.

Select the correct option using the options given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer 1

Option C - Both 1 and 2

More Information

■ Reserve Bank of India as a banker to the governments :-

• In terms of Section 20 of the RBI Act 1934, RBI has the obligation to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance, and other banking operations, including the management of the public debt of the Union. Further, as per Section 21 of the said Act, RBI has the right to transact Government business of the Union in India.

• State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments in terms of section 21 A of the Act.

• Thus, the legal provisions vest Reserve Bank of India with both the right and obligation to function as banker to the government.

• As of now, such agreements exist between RBI and all the State Governments except the Government of Sikkim. For Sikkim, the RBI has limited agreement for the management of its public debt.

• State Bank of Sikkim (state-owned) performs the role of the banker to the Sikkim government.

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Answer 2

Which of the following statements regarding the role of Reserve Bank of India is are correct?

1. There is both right and obligation on the Reserve Bank of India to act as a banker to both central and state governments.

2. RBI is a banker to each and every state government in India except Sikkim.

Select the correct option using the options given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2