Question

Assertion (A): Central Bank is also called as ‘Bankers Bank’.

Reason (R): Central Bank keeps the cash balances of commercial banks and gives loans to them on requirements, in the same manner as the commercial banks do for its consumers.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true but Reason (R) is false.

• Assertion (A) is false but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Explanation:

The Central Bank is known as the ‘Banker's Bank’ since it has a direct professional relationship with commercial banks. Commercial banks use the Central Bank to deposit cash reserves and borrow funds during financial emergencies, much as regular citizens do to save and borrow money.