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Question
Mention two ways in which the Reserve Bank of India assists the commercial banks.
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Solution
The Reserve Bank of India (RBI) assists commercial banks in two main ways:
- Lender of Last Resort: During times of financial difficulties, the RBI provides funds to commercial banks to ensure liquidity and stability in the banking system.
- Monetary Policy Regulation: The RBI manages interest rates and the money supply, which have a direct impact on commercial bank operations and help to ensure economic stability.
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