SSC Economics Sample Paper NCERT Sample Paper-6

  • question_answer
    Which of the following is/are the functions of RBI?
    1. Banker and debt manager to central government.
    2. It issues new currencies from time to time.
    3. It acts as banker?s bank for scheduled banks.
    Select the correct answer using the codes given below:

    A)  1 and 2 only

    B)  2 and 3 only

    C)  2 only 

    D)  3 only

    Correct Answer: B

    Solution :

    [b] 1. RBI as Monetary Authority of India RBI works as the monetary authority of India and there by operates the monetary policy. Monetary policy refers to an umbrella of operations used for the control of money supply in the economy with broad objective to maintain economic and financial stability; and ensure adequate financial resources for the purpose of development. 2. RBI as Issuer of Currency As per the provisions of the Section 22 of the Reserve Bank of India Act 1934, Reserve Bank of India has the sole right to issue Bank notes of all denominations. 3. RBI as Banker and Debt Manager to the Government Central Government entrusts the Reserve Bank with all its money, remittance, exchange and banking transactions in India and the management of its public debt. The Government also deposits its cash balances with the Reserve Bank. RBI's debt management policy aims at minimizing the cost of borrowing, reducing the roll-over risk, smoothening the maturity structure of debt, and improving depth and liquidity of Government securities markets by developing an active secondary market. 4. RBI as Banker of Banks RBI is bank of all banks in India. The other banks keep their current accounts with RBI and RBI helps them in maintaining statutory reserves with itself. RBI also enables the environment for swift and smooth inter-bank transactions. 5. RBI as a regulator and supervisor of financial system One of the most important functions of RBI is to work as regulator and supervisor of financial' system. RBI not only regulates and supervises the Indian Banks but also Foreign Banks Regional Rural Banks, Local Area Banks, Cooperative Banks, Financial Institutions including Development Financial Institutions (DFIs) and Non-Banking Financial Companies. 6. Management of foreign exchange reserves RBI manages the Foreign Exchange Management Act, 1999 to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. 7. Developmental & Promotional roles Apart from the above, RBI performs a wide range of promotional functions to support national objectives.

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