It reflects the well established fact that price stability is a prerequisite for sustainable growth and the creation of employment. Price stability preserves and bolsters consumers’ purchasing power, thus supporting consumption. It also enhances the efficacy of the market system in allocating resources.
According to the Act, such advances are repayable not later than three months from the date of making that advance. The maximum amount of such advance by the RBI and the interest charged thereon are, however, not specified in the RBI Act but are regulated by voluntary agreements with the State Governments. At present, RBI is the banker for 26 States (i.e.