Question

Which of the following is not a function of the Reserve Bank of India?

• A. Credit creation
• B. Credit control
• C. Government's Bank
• D. Determination of monetary policy

Hint:

Remember the key difference: Commercial banks create credit, while the Central Bank (RBI) controls credit.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question asks to identify which of the listed activities is not a primary function of the Reserve Bank of India (RBI), which is India's central bank.

Step 2: Detailed Explanation:
Let's examine the functions listed: \begin{itemize} \item (B) Credit control: This is a core function of the RBI. It uses tools like the repo rate, bank rate, and cash reserve ratio to control the amount of credit in the economy. \item (C) Government's Bank: The RBI acts as a banker, agent, and advisor to the central and state governments. This is a primary function. \item (D) Determination of monetary policy: The RBI is responsible for formulating and implementing the country's monetary policy to maintain price stability and ensure adequate credit flow. \item (A) Credit creation: This is the primary function of commercial banks (like SBI, HDFC, etc.). Commercial banks create credit by lending out the money they receive as deposits. The RBI's role is to control this credit creation, not to perform it for the general public. \end{itemize}

Step 3: Final Answer:
While credit control, acting as the government's bank, and determining monetary policy are all key functions of the RBI, credit creation is the primary function of commercial banks. Therefore, option (A) is the correct answer.