Class 12 Finance Chapter 2 Functions of the Reserve Bank of India

Class 12 Finance Chapter 2 Functions of the Reserve Bank of India Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Finance Chapter 2 Functions of the Reserve Bank of India Solutions in English and select need one. AHSEC Class 12 Finance Solutions Download PDF. HS 2nd Year Finance Textual Solutions.

Class 12 Finance Chapter 2 Functions of the Reserve Bank of India

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Banking Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Finance Textual Solutions English Medium for All Chapters, You can practice these here.

Functions of the Reserve Bank of India

Chapter: 2

Unit – 1: FINANCIAL INSTITUTIONS

A. Very Short Questions Answer:

1. In which year has the RBI adopted the Proportionate Reserve System of Note Issue?

Ans: The Reserve Bank of India adopted the Proportionate Reserve System of Note Issue in 1935.

2. In which year has the RBI adopted the Minimum Reserve System of Note Issue?

Ans: The Reserve Bank of India adopted the Minimum Reserve System of Note Issue in 1956.

B. Short Answer Questions:

1. Write two functions of the RBI.

Ans: (i) The RBI issues and manages currency notes.

(ii) The RBI acts as the banker, agent, and adviser to the Government.

2. What is Minimum Reserve System of Note Issue?

Ans: Under the Minimum Reserve System, the RBI is required to maintain a minimum reserve of ₹200 crore, including ₹115 crore in gold and the remaining amount in foreign securities, against the issue of currency notes.

3. Write two supervisory functions of the RBI.

Ans: (i) The RBI supervises and regulates commercial banks.

(ii) The RBI grants licences to banks and conducts their inspection.

4. Write two promotional functions of the RBI.

Ans: (i) The RBI promotes agricultural and rural credit.

(ii) The RBI encourages the development of banking and financial institutions.

5. Write two prohibited functions of the RBI.

Ans: (i) The RBI cannot engage in trade or commercial business.

(ii) The RBI cannot grant loans against immovable property.

6. What is Proportionate Reserve System?

Ans: Under the Proportionate Reserve System, the RBI was required to maintain a fixed proportion of gold and foreign securities against the total value of currency notes issued.

C. Long Answer Questions (Type-I): 

1. Write any two traditional functions of the RBI.

Ans: There are two traditional functions of the RBI:

(i) Issue of Currency Notes: The RBI has the sole authority to issue and manage currency notes in India (except one rupee notes and coins issued by the Government).

(ii) Banker to the Government: The RBI acts as the banker, agent, and financial adviser to the Central and State Governments. It manages government accounts and public debt.

2. Briefly state the promotional and supervisory functions of the RBI.

Ans: The promotional and supervisory functions of the RBI:

(i) Promotional Functions:

The RBI promotes agricultural and rural credit.

It encourages the development of banking and financial institutions.

It supports financial inclusion and economic development.

(ii) Supervisory Functions:

The RBI supervises and regulates commercial banks and financial institutions.

It grants licences to banks and conducts inspections.

It ensures the safety and stability of the banking system.

D. Long Answer Questions (Type-II): 

1. Discuss the traditional functions of the RBI.

Ans: The traditional functions of the Reserve Bank of India are as follows:

(i) Issue of Currency Notes: The RBI has the exclusive right to issue and manage currency notes in India.

(ii) Banker to the Government: The RBI acts as the banker, agent, and financial adviser to the Central and State Governments.

(iii) Banker’s Bank: The RBI acts as the banker to all commercial banks by keeping their cash reserves and providing financial assistance when needed.

(iv) Controller of Credit: The RBI regulates the supply of money and credit in the economy through various monetary policy tools.

(v) Custodian of Foreign Exchange Reserves: The RBI maintains and manages India’s foreign exchange reserves and ensures exchange rate stability.

(vi) Lender of the Last Resort: The RBI provides emergency financial assistance to commercial banks during financial crises.

2. Discuss the functions of the RBI.

Ans: The major functions of the Reserve Bank of India are:

(i) Issue of Currency Notes: The RBI issues and manages currency notes in India.

(ii) Banker to the Government: It acts as the banker, agent, and financial adviser to the Central and State Governments.

(iii) Banker’s Bank: It maintains the cash reserves of commercial banks and provides financial assistance to them.

(iv) Controller of Credit: It controls the supply of money and credit to maintain price stability.

(v) Custodian of Foreign Exchange Reserves: It manages India’s foreign exchange reserves and regulates foreign exchange transactions.

(vi) Promotional Functions: It promotes agricultural credit, rural development, financial inclusion, and the development of banking institutions.

(vii) Supervisory Functions: It supervises and regulates banks, grants banking licences, and conducts inspections.

(viii) Developmental Functions: It works for the overall development of the country’s financial system and supports economic growth.