How does Reserve bank of India supervise the functioning of banks? Why is it necessary?
Answers
Step-by-step explanation:
Why is this necessary? The Reserve Bank of India monitors the amount of money that banks loan out, and also the amount of cash balance maintained by them. It also ensures that banks give out loans not just to profiteering businesses but also to small cultivators, small-scale industries and small borrowers.
Reserve Bank of India (RBI) supervised the banks in the following ways :
(i) It monitors the balance kept by banks for day-to-day transactions.
(ii) It checks that the banks give loans not just to profit-making businesses and traders but also to small borrowers.
(iii) Periodically banks have to give details about lending, borrowers and interest rate to RBI.
It is necessary for securing public welfare. It avoids the bank to run the business with profit motive only. It also keeps a check on interest rate of credit facilities provided by bank. RBI makes sure that the loans from the banks are affordable and cheap.