CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking
In India's banking structure, which institution acts as the banker to the government and the banker's bank, and also issues currency notes (other than one-rupee notes)?
The Reserve Bank of India is the correct answer because it is India's central bank. It issues currency notes, acts as banker to the central and state governments, and serves as the banker's bank for commercial banks. SBI is merely a commercial bank without these powers.
- AState Bank of India
- BReserve Bank of IndiaCorrect
- CNational Bank for Agriculture and Rural Development
- DSecurities and Exchange Board of India
Explanation
The Reserve Bank of India is the central bank. It issues currency notes, acts as banker to the government and holds reserves of commercial banks as their banker. SBI is only the largest commercial bank and does not perform these central banking functions.
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