Question

Reserve Bank of India (RBI) performs the function of Banker to the Banks by acting as a :

(i) Clearing House

(ii) Custodian of Cash Reserves

(iii) Lender to the Government

(iv) Periodic inspection of Banks

• A. (i) and (ii)
• B. (ii) and (iii)
• C. (i), (ii) and (iv)
• D. (i) and (iv)

Hint:

As banker to banks, the RBI runs the clearing house, keeps their cash reserves and inspects them. Lending to the government is a banker to government function.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
The RBI is the central bank. It acts as banker to the government and also banker to the commercial banks.

Step 2: Check each activity:
(i) Clearing house: banks settle their claims on each other through accounts with the RBI. This is a banker to banks function. TRUE.
(ii) Custodian of cash reserves: banks keep a share of deposits with the RBI as reserves. This is a banker to banks function. TRUE.
(iii) Lender to the Government: the RBI lends to the government for short periods. This is a banker to government function. FALSE here.
(iv) Periodic inspection of banks: the RBI supervises and inspects banks. This is part of its role as banker and regulator of banks. TRUE.

Step 3: Match with the options:
(i), (ii) and (iv) are correct, which is option (C).
Option (A) leaves out (iv). Option (B) has (iii). Option (D) has (i) and (iv) but leaves out (ii).

Final Answer:
The correct choice is (i), (ii) and (iv), option (C).