Question

State with reasons whether you agree or disagree with the following statements.
The Central Bank works as Banker's bank or RBI acts as a Banker's Bank.

Answer 1

Yes, I do agree with this statement.

All other banks in the country are bound either by law or by convention to keep a certain proportion of their total deposits as reserve with me Central Bank. These reserves help the Central Bank to control the issue of credit by commercial banks. They also keep their spare cash with the Central Bank on which they draw as and when needed. This is how the Central Bank serves as a bankers’ bank.