Question

Identify and explain any one function of Central Bank as indicated in the image given below: 

Hint:

Always check the direction of currency flow: if money flows out of India (like imports, gifts, tourism), it creates demand for foreign exchange. If foreign money comes into India (like loans or exports), it’s a source of foreign exchange supply.

Answer 1

The image highlights various key functions of the Reserve Bank of India (RBI), the Central Bank of the country. One prominent function indicated is:

Function: Banker to the Government

As seen in the second arrow (pointing toward the Parliament building), the Central Bank acts as a banker, agent, and advisor to the government. This includes:

• Maintaining and operating the accounts of central and state governments.
• Receiving and making payments on behalf of the government.
• Managing public debt by issuing government securities.
• Advising the government on monetary and fiscal policy matters.

This function ensures smooth financial transactions of the government and supports the implementation of effective economic policies.

Alternative Identifiable Functions from Image:

• Issue of Currency: Represented by the stack of notes, indicating RBI’s sole authority to issue currency notes in India (except ₹1 notes and coins).
• Custodian of Foreign Exchange: Represented by the symbol of foreign currencies, indicating RBI's role in managing the Forex reserves and exchange rate stability.
• Bankers’ Bank: Depicted by the image of a bank, showing that RBI supervises and regulates commercial banks in the country.