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Question

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

A
Only 2
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B
1 and 2
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C
2 and 3
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D
All of the above
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Solution

The correct option is B 1 and 2
The Reserve Bank of India acts as a lender of last resort and a bankers' bank. It provides credit to banks in times of need and other banks retain their deposits with the RBI. Although RBI time and again gives its views on the health of the banking sector and takes measures to strengthen it, it does not really advise the commercial banks on monetary matters.

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