Question

As per the RBI Act, $1934$, the following functions are described as the functions of a Central Bank:
(i) Banking functions
(ii) Advisory functions
(iii) Supervisory functions
(iv) Promotional functions
Identify the correct combination:

• A. (i), (iii) and (iv)
• B. (i), (ii) and (iv)
• C. (ii), (iii) and (iv)
• D. Only (i) and (iii)

Answer 1

The correct option is A (i), (iii) and (iv)

Central bank is an apex bank that controls the entire banking system of a country. It is the sole agency of note issuing and controls the supply of money in the economy. It performs the following functions as per the the Reserve Bank of India Act, 1934:

1. Banking functions: The central bank of an economy performs all types of basic banking services for other commercial banks and government.

2. Supervisory functions: It supervises other banks and government into various economic conditions and guide them at the time of inflation or deflation in the economy.

3. Promotional functions: The central bank also perform promotional functions which includes integrating with world economies and maintaining foreign reserves. They represent the country's economy internationally.