Q1. [3]
Explain any three functions of the Reserve Bank of India.
Previously asked in CBSE board exam
2023 32/1/1 Q29(a)
Generated by claude-sonnet-4-6 · 2026-06-15 06:56 · grounding rag
Model Answer
The Reserve Bank of India (RBI) performs the following functions:
- Issues Currency: The RBI issues currency notes on behalf of the Central Government. No other bank is allowed to issue currency.
- Supervises Banks: The RBI monitors banks to ensure they maintain a minimum cash balance from their deposits and lend to all sections, including small cultivators and small-scale industries.
- Regulates Lending: Banks must periodically submit information to the RBI on how much they are lending, to whom, and at what interest rate, ensuring fair lending practices.
Source: Money and Credit, Formal Sector Credit in India
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Explanation
- Examiners expect three distinct points, each clearly labelled — one for each mark.
- Key terms to use: issues currency, supervises, monitors cash balance, directs lending.
- Avoid writing about informal sector lenders — the RBI does not supervise them; that contrast is a common exam trap.
- Each point needs only 1–2 lines. Do not elaborate beyond that for a 3-mark answer.
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