Question

How does the Reserve Bank of India supervise The functioning of banks? why is this necessary?

Answer 1

(a) The RBI monitors the banks in maintaining a minimum cash balance out of the deposits they receive.
(b) The RBI sees that the banks give loans not just to profit-making business and traders but also to small cultivators, small scale industries, small borrowers etc.

Answer 2

1.The RBI monitors the banks if they actually maintains the cash balance
2.The banks have to submit documents to RBI on how much they are giving money,to whom,etc..
3.The RBI also checks that the banks dont give loans to profit making business and traders but also small cultivators..
This is necessary so that the banks do not cheat any customers..