Question

Elaborate the ‘Banker’s Bank and Supervisor’ function of the Reserve Bank of India.

Hint:

The RBI ensures liquidity and stability in the banking system by acting as a regulator and supervisor.

Answer 1

The Reserve Bank of India (RBI) performs the following functions as the ‘Banker’s Bank and Supervisor’: 
Banker’s Bank: The RBI acts as a banker to all scheduled commercial banks. It provides short-term funds, acts as a lender of last resort, and facilitates inter-bank clearing. 
Supervisor: The RBI supervises and regulates banks to ensure financial stability. It monitors compliance with banking regulations, manages non-performing assets (NPAs), and ensures that banks maintain required reserves. These functions help in maintaining stability and liquidity in the financial system.