Question

Explain any two functions of the Reserve Bank of India.

Answer 1

Reserve Bank of India is an apex bank that controls the entire banking system of India. It is the sole agency of note issuing and controls the supply of money in the economy. It serves as the banker of the government and manages foreign exchange of the government. Any two functions of RBI are :-

1. Bank of issuing notes: Reserve bank of India has monopoly rights of issuing notes. This is called currency authority function of central banks. All notes issued by RBI are an unlimited legal tender in India.

2. Banker to the Government: Reserve bank of India is an banker, agent and financial adviser to the government. It manages the account of the government, it buys and sells the securities of the government and it frames policies to regulate the money market.