Banker to Banks: RBI's Lender Role Explained
The role of a 'Banker to Banks' involves the central bank managing the accounts of commercial banks, acting as a clearinghouse for interbank payments, and providing essential banking services to them.
The 'lender of the last resort' function is crucial for maintaining financial stability. It means the central bank provides emergency liquidity funding to solvent but illiquid financial institutions when they cannot obtain funds from any other market source.
The Reserve Bank of India (RBI) performs both these critical functions in the Indian financial system. It oversees the banking sector and provides liquidity support when needed.
Commercial banks like the Nationalised banks, State Bank of India, and Union Bank of India operate under the RBI's supervision but do not act as the central bank or the ultimate lender of last resort.
Therefore, the institution acting as the Banker to Banks and the 'lender of the last resort' is the Reserve Bank of India.
Important Questions from Reserve Bank of India
Which of the following is not the function of Reserve Bank of India?
Which of the following banks issues currency notes in India?
Who is the Governor of the Reserve Bank of India? (As of 2017)
Which of the following isnota function of Reserve Bank of India?
Which of the following statements related to the Reserve Bank of India (RBI) is/are true?
Statements:
I. RBI was established under the Reserve Bank of India Act, 1935.
II. RBI maintains a current account of State Governments for keeping their cash balances.
III. Sir Benegal Rama Rau was the longest serving governor of RBI.
