UPSC Prelims 2012 · GS Paper I
Question 75: Economy and Social Development
The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following?
- 1.Other banks retain their deposits with the RBI.
- 2.The RBI lends funds to the commercial banks in times of need.
- 3.The RBI advises the commercial banks on monetary matters.
Select the correct answer using the codes given below :
AnswerUPSC’s answer is (d).
As the bankers' bank, the RBI holds the cash reserves that commercial banks must keep with it, lends to them as lender of last resort in times of need, and guides them on monetary and credit matters. All three statements describe this role.
- 1. Banks keep reserves with the RBI.
- 2. The RBI is lender of last resort to commercial banks.
- 3. The RBI advises banks on monetary and credit matters.
How you could have got this
- If you were sure statement 1 is correct, (a) goes: it leaves 1 out.
What you needed to know: Banks keep reserves with the RBI.
- Then, if you were sure statement 2 is correct, (c) goes: it leaves 2 out.
What you needed to know: The RBI is lender of last resort to commercial banks.
- Then, if you were sure statement 3 is correct, (b) goes: it leaves 3 out.
What you needed to know: The RBI advises banks on monetary and credit matters.
Only (d) is left. This one needs every statement.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Incomplete: banks also keep their deposits with the RBI.
- (b) Incomplete: the RBI also advises commercial banks.
- (c) Incomplete: the RBI also lends to commercial banks in times of need.
- (d) Correct: banks hold reserves with it, it lends to them, and it advises them.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2012, General Studies Paper I, Series A. The paper on upsc.gov.in.