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The Reserve Bank of India (RBI) acts as a bankers' bank.This would imply which of the following ?
- Other banks retain their deposits with RBI
- The RBI lends funds to the commercial banks in times of need.
- The RBI advises the commercial banks on monetary matters.
Select the correct answer using the codes given below
- a)Only 2
- b)1 and 2
- c)2 and 3
- d)All of the above
Correct answer is option 'B'. Can you explain this answer?
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The Reserve Bank of India (RBI) acts as a bankers bank.This would impl...
Header: The Reserve Bank of India (RBI) as a bankers bank
The Reserve Bank of India (RBI) serves as the central bank of the country and performs various roles in the Indian banking system. One of its important functions is acting as a bankers bank. Let's understand what this implies.
Header: Other banks retain their deposits with RBI
As a bankers bank, the RBI provides banking services to other commercial banks operating in the country. One of these services is that other banks can retain their deposits with the RBI. Commercial banks hold a certain portion of their deposits with the RBI as a reserve requirement. This helps in maintaining liquidity in the banking system and ensures that banks have a secure place to keep their funds.
Header: The RBI lends funds to the commercial banks in times of need
Another role of the RBI as a bankers bank is to provide financial assistance to other commercial banks when they face liquidity shortages or financial difficulties. In times of need, commercial banks can borrow funds from the RBI through various lending facilities such as the repo rate and the Marginal Standing Facility (MSF). These borrowing facilities help banks manage their short-term liquidity requirements and maintain stability in the banking system.
Header: The RBI advises the commercial banks on monetary matters
The RBI also acts as an advisor to the commercial banks on monetary matters. It formulates and implements monetary policies in the country, which have a direct impact on the functioning of commercial banks. The RBI provides guidance and recommendations to commercial banks regarding interest rates, credit policies, and other monetary measures to ensure the stability and efficiency of the banking system.
In conclusion, as a bankers bank, the Reserve Bank of India (RBI) retains deposits from other commercial banks, lends funds to them in times of need, and advises them on monetary matters. Therefore, the correct answer is option 'b) 1 and 2'.
The Reserve Bank of India (RBI) serves as the central bank of the country and performs various roles in the Indian banking system. One of its important functions is acting as a bankers bank. Let's understand what this implies.
Header: Other banks retain their deposits with RBI
As a bankers bank, the RBI provides banking services to other commercial banks operating in the country. One of these services is that other banks can retain their deposits with the RBI. Commercial banks hold a certain portion of their deposits with the RBI as a reserve requirement. This helps in maintaining liquidity in the banking system and ensures that banks have a secure place to keep their funds.
Header: The RBI lends funds to the commercial banks in times of need
Another role of the RBI as a bankers bank is to provide financial assistance to other commercial banks when they face liquidity shortages or financial difficulties. In times of need, commercial banks can borrow funds from the RBI through various lending facilities such as the repo rate and the Marginal Standing Facility (MSF). These borrowing facilities help banks manage their short-term liquidity requirements and maintain stability in the banking system.
Header: The RBI advises the commercial banks on monetary matters
The RBI also acts as an advisor to the commercial banks on monetary matters. It formulates and implements monetary policies in the country, which have a direct impact on the functioning of commercial banks. The RBI provides guidance and recommendations to commercial banks regarding interest rates, credit policies, and other monetary measures to ensure the stability and efficiency of the banking system.
In conclusion, as a bankers bank, the Reserve Bank of India (RBI) retains deposits from other commercial banks, lends funds to them in times of need, and advises them on monetary matters. Therefore, the correct answer is option 'b) 1 and 2'.
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The Reserve Bank of India (RBI) acts as a bankers bank.This would impl...
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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The Reserve Bank of India (RBI) acts as a bankers bank.This would imply which of the following ? Other banks retain their deposits with RBI The RBI lends funds to the commercial banks in times of need. The RBI advises the commercial banks on monetary matters.Select the correct answer using the codes given belowa)Only 2b)1 and 2c)2 and 3d)All of the aboveCorrect answer is option 'B'. Can you explain this answer?
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