How does RBI supervise the functioning of banks
Answers
Answer: RBI supervise banks by following method-
1. CRR ( cash reserve ratio) - it is the minimum percentage of net time deposits and time liabilitiesin which every commercial bank must keep with central bank.
2.SLR ( statutory liquidity ratio ) - RBI supervises commercial banks to keep a percentage of their deposit in cash and other liquid assets . This percentage is called SLR.
3.RBI issues guidelines for fixing rate of interest on borrowing and lending by commercial banks.
The RBI supervises the functioning of banks in the following manner:
1. It ensures whether the banks are maintaining a minimum cash reserve of the deposits.
2. It ensures that people from different backgrounds get hold of loans and not only the rich, businessmen and traders.
3. The above point is ensured through periodic statements given to the RBI that consist of information about to whom the financial institution has given a mortgage, at what rate, etc.
This tracking is necessary to ensure that equality in the financial zone is maintained and small industries also get an outlet to grow.
#SPJ3