| Consider the following functions : |
| (1) Issue of bank notes of all denominations |
| (2) Lender of the last resort |
| (3) Underwrite the loans of state and central governments |
| (4) Periodic inspection of Commercial banks. Which of the above are functions of the Reserve Bank of India? |
A) 1, 2 and 4
B) 1 and 4
C) 1, 2, 3 and 4
D) 1 and 3
Correct Answer: A
Solution :
[a] Main Functions of the RBI are: MONETARY AUTHORITY: Formulates, implements and monitors the monetary policy. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors. REGULATORAND SUPERVISOR OF THE FINANCIAL SYSTEM: Prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objective: maintain public confidence in the system, protect depositors" interest and provide cost-effective banking services to the public. Regulator and supervisor of the payment systems Authorises setting up of payment systems Lays down standards for operation of the payment system Issues direction, calls for returns/information from payment system operators. MANAGER OF FOREIGN EXCHANGE: Manages the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. ISSUER OF CURRENCY: Issues and exchanges or destroys currency and coins not fit for circulation. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality. DEVELOPMENTALROLE: Performs a wide range of promotional functions to support national objectives. RELATED FUNCTIONS: Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks.
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