Read the following passage carefully and answer the questions given below:
Money is the commonly accepted medium of exchange. The first and foremost role of money is that it acts as a medium of exchange. Economic exchanges without the mediation of money are referred to as barter exchanges. Central bank has several important functions. It issues the currency of the country. India got its central bank in 1935. Its name is the 'Reserve Bank of India'. It controls money supply of the country through various methods, like bank rate, open market operations and variations in reserve ratios. It acts as a banker to the government. It is the custodian of the foreign exchange reserves of the economy. It also acts as a bank to the banking system. Currency issued by the Central Bank can be held by the public or by the commercial banks, and is called the 'high-powered money' or 'reserve money' or 'monetary base' as it acts as a basis for credit creation.
Choose the incorrect from the following statements concerned with RBI:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → It directly deals with the Public
The RBI does not deal directly with the public. The public deal with the commercial banks for deposits and loans.
The passage gives the other statements as functions of the central bank:
It keeps the foreign exchange reserves.
It acts as a bank to the banking system.
It controls money supply.
NCERT (2026-27): “Central bank Central Bank is a very important institution in a modern economy. Almost every country has one central bank. India got its central bank in 1935. Its name is the ‘Reserve Bank of India’. Central bank has several important functions. It issues the currency of the country. It controls money supply of the country through various methods, like bank rate, open market operations and variations in reserve ratios. It acts as a banker to the government. It is the custodian of the foreign exchange reserves of the economy. It also acts as a bank to the banking system, which is discussed in detail later… Commercial Banks Commercial banks are the other type of institutions which are a part of the money-creating system of the economy. In the following section we look at the commercial banking system in detail. They accept deposits from the public and lend out part of these funds to those who want to borrow. The interest rate paid by the banks to depositors is lower than the rate charged from the borrowers…” |