RBI as Banker of Banks

RBI as Banker of Banks

RBI is bank of all banks in India. As per the Banking Regulations Act 1949, Banks have to keep a portion of their demand and time liabilitiesAny claim for money against the assets of a company, such as bills of creditors, income tax payable, debenture redemption, interest on secured and unsecured ..... as cash reserves with the Reserve Bank, thus necessitating a need for maintaining accounts with the Bank.

• Earlier, (originally in the BR act) it was as follows – 5% of demand liabilities and 2% of time liabilities. But now it is the portion of Net Demand and Time Liabilities (NDTL).
  
• So, the RBI provides banks with the facility of opening accounts with itself. This is the 'Banker to Banks' function of the Reserve Bank, which is delivered through the Deposit Accounts Department (DAD) of RBI at regional offices.
  

LORLThe banks can borrow from the RBI on the basis of eligible securities or any other arrangement and at the time of need or crisis, .....:

The banks can borrow from the RBI on the basisIn a futures market, basis is defined as the cash price (or spot price) of whatever is being traded minus its futures price for the ..... of eligible securities or any other arrangement and at the time of need or crisis, they approach RBI for financial help. Thus RBI works as Lender of the Last Resort (LORL) for banks.