Question
GSEasyPrelims 2012Economy

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 the commercial banks in times of need.
  3. The RBI advises the commercial banks on monetary matters.

Select the correct answer using the codes given below :

Explanation

Statement 1 is Correct: As the bankers' bank, the RBI maintains the banking accounts of all scheduled commercial banks. Banks are required to keep a portion of their deposits with the RBI in the form of the Cash Reserve Ratio (CRR) to ensure financial stability.

Statement 2 is Correct: The RBI acts as the 'Lender of Last Resort,' providing emergency liquidity and credit to commercial banks when they face a financial crisis or are unable to raise funds from the market.

Statement 3 is Correct: In its capacity as the apex bank, the RBI performs a supervisory and advisory role, providing guidance to commercial banks on monetary matters, credit management, and policy implementation to ensure the smooth functioning of the banking system.

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