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 RB I. > 2. The RBI lends funds to the commercial banks in times of need. 3. The RBI advises the commercial banks

examrobotsa's picture

Submitted by examrobotsa on

Q: 100 (IAS/2012)
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 RB
I.
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:

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,292,127,53,67,7,292

keywords: 

{'reserve bank': [1, 0, 3, 4], 'commercial banks': [0, 0, 1, 1], 'bank': [0, 1, 0, 1], 'other banks': [0, 1, 1, 1], 'bankers': [0, 0, 0, 1], 'rbi': [1, 4, 2, 23], 'deposits': [2, 1, 3, 9], 'funds': [0, 1, 2, 9], 'monetary matters': [0, 0, 0, 1], 'india': [8, 1, 7, 13]}

The Reserve Bank of India (RBI) acting as a bankers` bank implies several things.

Option 1 suggests that other banks retain their deposits with the RBI. This is correct, as commercial banks in India are legally required to keep a portion of their deposits with the RBI known as the cash reserve ratio.

Option 2 says that the RBI lends funds to commercial banks in times of need. This is also right, as the RBI is the ultimate provider of funds to the banking system and lends monies to banks through its repo operations when banks face liquidity crises.

Option 3 posits that the RBI advises commercial banks on monetary matters. This is true as well. The RBI, as the central banking authority, is responsible for formulating the country`s monetary policy, which includes providing guidance to commercial banks on various financial and monetary matters.

Therefore, all these options (1, 2 & 3) are aspects of the RBI`s role as a bankers` bank, and the correct answer is option 4 (1, 2, and 3).

Practice this on app