ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The central bank is the custodian of the banking reserves of the country. Whenever necessary, it also lends money to other banks by rediscounting bills of exchange and against approved commercial papers. The central bank is the lender of the last resort because the money supply of the country is under its control.

Detailed explanation-2: -The Central Bank functions as a commercial bank for the government. As banker to the government, the Central Bank provides all those services and facilities to the government which the public gets from the ordinary banks. It operates the accounts of the public enterprises.

Detailed explanation-3: -Central banks carry out a nation’s monetary policy and control its money supply, often mandated with maintaining low inflation and steady GDP growth. On a macro basis, central banks influence interest rates and participate in open market operations to control the cost of borrowing and lending throughout an economy.

Detailed explanation-4: -Out of the given options, conduct of monetary policy and lending to the commercial banking system are two common functions of the RBI.