The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following? 1) 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:

Question

CollectorBabu · Accepted Answer

Correct Answer: 1, 2 and 3. Reserve Bank of India holds cash reserves of banks as well as it can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much-needed liquidity when no one else is willing to extend credit to that bank. So it shows that statement 1 and 2 are correct. Statement 3 is also correct as the Reserve Bank of India is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934. Hence, the correct option is D.

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