Explain any five functions of the Reserve Bank of India.

OR

Explain any two/five functions of central bank of a country.

The Reserve Bank of India (RBI), being the central bank of India, performs the following key functions:

1. Issue of Currency Notes — The RBI has the monopoly over issuing currency notes in India. It keeps reserves of gold, silver and foreign exchange to back the notes and to inspire public confidence. The monopoly ensures uniformity in currency, avoids over-issue and lends prestige to the currency system.

2. Banker to the Government — The RBI acts as banker, agent and advisor to the Central and State Governments. It receives and makes payments on behalf of the Government, manages the national debt, issues Government securities, and represents the Government in international monetary conferences.

3. Banker's Bank and Lender of Last Resort — The RBI acts as the bank for all commercial banks in the country. Commercial banks keep their cash reserves with it. When a commercial bank needs funds, it can obtain loans and rediscount bills with the RBI. Hence, the RBI is also called the 'lender of last resort'.

4. Credit Control — The RBI exercises both quantitative control (Bank Rate, Open Market Operations, CRR, SLR) and qualitative control (margin requirements, credit rationing, moral suasion, publicity) to regulate the volume and direction of credit in the country. This helps maintain stability in prices and the exchange rate.

5. Custodian of Foreign Currency Reserves — The RBI is the sole custodian of gold, foreign exchange and all other reserves of the country. It manages these reserves prudently to overcome difficulties in the balance of payments and to stabilise exchange rates.