Prelims 2012 · Economy · Question 75
The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following?
- Other banks retain their deposits with the RBI.
- The RBI lends funds to the commercial banks in times of need.
- The RBI advises the commercial banks on monetary matters.
Select the correct answer using the codes given below:
Answer
1, 2 and 3
1. Other banks retain their deposits with the RBI — Correct. Commercial banks maintain reserve balances with RBI; this is a core feature of RBI being their banker.
2. The RBI lends funds to the commercial banks in times of need — Correct. RBI provides liquidity support and acts as the lender of last resort to banks.
3. The RBI advises the commercial banks on monetary matters — Correct. As bankers’ bank, RBI also guides/supervises banks and issues policy directions/advice on banking and monetary matters.
Hence, all three statements are correct. My earlier exclusion of Statement 3 was too narrow; UPSC has interpreted the bankers’ bank role broadly to include advisory/guidance functions as well.