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1Custodian of Cash Reserves of Commercial Banks:The commercial banks hold deposits in the Reserve Bank and the latter has the custody of the cash reserves of the commercial banks.2Custodian of Country’s Foreign Currency Reserves:The Reserve Bank has the custody of the country’s reserves of international currency, and this enables the Reserve Bank to deal with crisis connected with adverse balance of payments position.3Lender of Last Resort:The commercial banks approach the Reserve Bank in times of emergency to tide over financial difficulties, and the Reserve bank comes to their rescue though it might charge a higher rate of interest.4Central Clearance and Accounts Settlement:Since commercial banks have their surplus cash reserves deposited in the Reserve Bank, it is easier to deal with each other and settle the claim of each on the other through book keeping entries in the books of the Reserve Bank. The clearing of accounts has now become an essential function of the Reserve Bank.

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