How does the RBI supervise the functioning of Bank? Why is this necessary?
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1. RBI holds a part of the cash reserve of the commercial banks. RBI mainly ensures that the banks maintain a minimum cash balance out of the deposits they receive.
2. The commercial banks have to submit information to RBI on how much they are lending to whom and at what interest rate etc.
3. RBI observes the banks are not only providing loans to profitable business but also to traders and small cultivators, small scale industries, small borrowers ets
2. The commercial banks have to submit information to RBI on how much they are lending to whom and at what interest rate etc.
3. RBI observes the banks are not only providing loans to profitable business but also to traders and small cultivators, small scale industries, small borrowers ets
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The Reserve Bank of India supervises the functioning of formal sources of loans. Banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. The RBI sees that banks give loans not just to profit- making businessmen and traders but also to small cultivators, small scale industries, to small borrowers etc. Periodically banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate etc.
It is necessary to make the activities of all banks uniform in the country. It also helps to prevent unfair practices in banking
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