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

Question

Accepted Answer

Banker's Bank and Supervisor function of RBI:

Banker's Bank:
1. Holds reserves of commercial banks
2. Provides lending facility (Repo Rate)
3. Acts as lender of last resort
4. Clears inter-bank transactions
5. Provides payment and settlement system

Supervisor:
1. Regulates and supervises commercial banks
2. Sets capital adequacy norms
3. Conducts bank inspections
4. Enforces compliance with regulations
5. Manages banking licenses
6. Protects depositors' interests

These functions ensure stability and efficiency of the banking system. RBI acts as a guardian of the banking system, ensuring proper functioning and protecting public interest.