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“Under the provisions… (Class 12 Economics 2026, Q12)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/1/1 · 3 marks · Short answer

CBSE Class 12 Economics 2026: question 12

Set in the CBSE Class 12 board exam of 2026, paper 58/1/1, section A, question 12, for 3 marks. Try it first; the hints and our step-by-step solution are below.

Q12 · 3 marks · Short answerMoney and Banking

“Under the provisions stated in the Section 20 and Section 21 of the Reserve Bank of India (RBI) Act, 1934, the RBI is mandated to handle the banking operations of the Government of India.”
In the light of the given statement, elaborate the indicated function of the Reserve Bank of India.

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/1/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

Sections 20 and 21 of the RBI Act deal with the government's banking business.

Hint 2

Think of what a bank does for an ordinary customer, then apply it to the government.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. The function indicated is RBI as banker to the government. RBI keeps the accounts of the Central and State governments: it accepts their deposits, makes payments on their behalf and handles remittances, exchange and other banking operations for them.

    2 marks

  2. It also lends to the government (for example through ways and means advances) when there is a temporary shortfall or a financial crisis, so that government functioning is not disrupted, and it advises the government on financial matters.

    1 mark

Answer: RBI acts as banker to the government: it manages government accounts, receipts, payments and remittances, and provides credit to the government when needed.

Where the marks are

  • Identifies and explains RBI as banker to the government (marked as a whole, 3)

Revise the chapter

  • Chapter: Money and Banking (notes, formulas, where marks are lost and every past question)
Practise this chapterBoard-style questions from Money and Banking, one at a time, marked against the answer key and marking points.Back to the full paper2026 board paper, set 58/1/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.