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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 the 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
2 and 3 only
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B
1 and 2 only
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C
1 and 3 only
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D
1, 2 and 3
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Solution

The correct option is C 1 and 2 only
1:The Reserve Bank of India(RBI) is an apex institution that controls the entire banking system of India.
2:The Reserve Bank of India(RBI) acts as a banker's bank as it takes deposits of all the commercial banks and lends money to these banks when they are facing a liquidity crunch or any type of insolvency.
3:RBI is the last resort to provide loans to the commercial banks against any type of collateral.
4: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
5:Other banks retain their deposits with the RBI and RBI lends funds to the commercial banks in times of need.

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