Department Of Technical Education

Andhra Pradesh
Name Staff Member : P. BADARINARAYANA
Designation : Sr.Lecturer
Branch : DCCP
Institute : Govt. Polytechnic, NELLORE
Year/Semester : VI Semester
Subject : BANKING
Sub. Code : CCP-604(B)
Topic : Functions of RBI
Duration : 50 Mts.
Sub Topic : Bankers’ Bank and Lender of last
resort
Teaching Aids : Animations
CCP604(B)40 1
Objective
On completion of this period you
would be able to know
 The role of RBI as the bankers bank
and lender of last resort

CCP604(B)40 2
Recap
 In the last lesson you have seen the function
of RBI as a banker to the Government.
 Today we will see another function of RBI as
the Bankers’ bank and Lender of last resort.

CCP604(B)40 3
Lender of Last Resort
 The RBI is the supreme banking authority of
the country and functions as a Banker to the
Banks.
 The RBI keeps the cash reserves of
commercial and other banks and acts as the
custodian of reserves of the country, which
support the country’s credit and banking
system.

CCP604(B)40 4
Bankers’ Bank
 The RBI acts as a clearing house for
member banks for settling their mutual
transactions by book entries
 All the banks in the country have deposit
accounts with RBI for the purpose of
maintaining cash reserves as also for
settlement of clearing transactions.

CCP604(B)40 5
Lender of Last Resort

 Scheduled Banks may approach RBI for

financial assistance in the form of rediscount
of eligible bills of exchange and promissory
notes.
 RBI may advances loans to scheduled banks
against the security of stocks, funds and other
eligible trustee securities etc. repayable of
demand or on the expiry of fixed periods.

CCP604(B)40 6
Lender of last resort
 In case a commercial bank is not in a position
to raise finances from other sources, then as a
last resort, it may approach RBI for necessary
financial accommodation.
 The RBI as a lender of the last resort, assumes
the responsibility meets the credit facilities of
commercial banks.

CCP604(B)40 7
Extensive powers have been
conformed on RBI
 For supervision and
 Control of banks
 To protect the interests of depositors
 Under banking regulation act 1949

CCP604(B)40 8
Summary
 In this lesson we have seen the function
of RBI as a Bankers’ bank and as a
Lender of Last resort.

CCP604(B)40 9
Frequently asked questions
1. Explain the function of RBI as a bankers’
bank.
2. How the RBI functions as Lender of last
resort?

CCP604(B)40 10