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InterviewSolution
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Which bank is referred to as a Banker’s Bank ? Why is it called so ? |
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Answer» Central Bank (RBI in case of India). Central Bank regulate and supervise the Commercial Banks. Being the apex bank, the Central Bank (RBI) acts as the banker to other banks. As the banker to banks, the Central Bank functions in three capacities : (i) Custodian of Cash Reserves : All the commercial banks are required to keep a certain proportion of their deposits known as Cash Reserve Ratio or CRR with the Central Bank. In this way, Central Bank acts as a custodian of cash reserves of Commercial banks. (ii) Lender of the Last Resort: • The Central Bank acts as the lender of the last resort. • When commercial banks fail to meet their financial requirements from other sources, they can approach the Central Bank which provide them loan and advances as lender of the last resort. (iii) Clearing House : As Central Bank holds the cash reserves of all the commercial banks, it becomes easier and more convenient for it to act as their clearing house |
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