how does the Reserve Bank of India supervise The functioning of the banks. why is this necessary?
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The RBI supervises the functioning of formal sources of credit in india. It is the Central Bank of India.
It supervises in the following way:
1. The RBI monitors that the banks actually maintain the required cash balance out of the deposits they receive. Banks in india these days hold about 15% of their deposits as cash.
2. RBI sees that the banks give loan not just to profit making & traders but also to small cultivators, small scale industries, to borrow , etc.
3. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rates, etc.
It supervises in the following way:
1. The RBI monitors that the banks actually maintain the required cash balance out of the deposits they receive. Banks in india these days hold about 15% of their deposits as cash.
2. RBI sees that the banks give loan not just to profit making & traders but also to small cultivators, small scale industries, to borrow , etc.
3. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rates, etc.
Answered by
7
Answer: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.
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