The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following?<br/>1. Other banks retain their deposits with the RBI.<br/>2. The RBI lends funds to the commercial banks in times of need.<br/>3. The RBI advises the commercial banks on monetary matters.<br/><br/>Select the correct answer using the codes given below:

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.