Question

Explain the reason for necessity of supervision by the rbi of formal sources of loans

Answer 1

Hello friends.

It is a well-known fact, the Reserve Bank of India actually supervise the entire functioning of formal sources of loan/credit in India.  Due to this, it is otherwise known as Central Bank of India.  

The commercial banks need to hold the part of cash reserves with the Reserve Bank of India, apart from maintaining the minimum cash balance completely out of deposits they actually receive.

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Answer 2

Answer:

rbi checks whether the banks maintain a minimum cash balance, give loans to all; not only to profit making businessmen but also to small cultivators

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