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:

The correct answer is D. All three statements are functions the RBI performs for commercial banks, which is what the bankers' bank role means.

• Statement 1 is correct. Scheduled commercial banks keep a part of their deposits with the RBI as the Cash Reserve Ratio (CRR). The RBI also holds the banks' balances for interbank clearing and settlement. Do not confuse this with the SLR, which banks hold in their own approved securities, not with the RBI.
• Statement 2 is correct. The RBI is the lender of last resort. Banks in liquidity stress can borrow through the Liquidity Adjustment Facility (repo) and, since 2011, the Marginal Standing Facility.
• Statement 3 is correct. The RBI guides commercial banks on monetary and credit matters, and it supervises them under the Banking Regulation Act, 1949 and the RBI Act, 1934.

Options A, B and C each drop one of these functions, so they fail. The concept links directly to Mains GS-3 on monetary transmission and liquidity management, where the repo rate and CRR decide how cheaply banks can lend to the economy. The Monetary Policy Committee, set up in 2016, now decides the policy rate, but the banker functions described here still hold.

Trap: aspirants often pick A or B because they assume the advisory role is not a banker function. It is part of the RBI's supervisory and guiding role over banks.