In what ways does the Reserve Bank of India supervise the functioning of banks?
Why is this necessary?
NCERT Class X
Social Studies - Understanding Economic Development
Chapter _MONEY AND CREDIT
Answers
(i) The Commercial banks are required to maintain a minimum cash balance out of the deposits they receive.
(ii) The RBI monitors that the banks actually maintain the cash balance.
(iii) The RBI sees that the banks give loan not just to profit-making businesses and traders but also to small cultivators, small-scale industries, small borrowers, etc.
(iv) Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.
(V) RBI fixes the rate of interest which is accepted by all the banks in the country-commercial and national banks. it also controls the flow of currency in the economy to maintain the stability of the currency.
Answer:
Explanation:
The RBI supervises the functioning of banks in this manner -
1) It sees whether the banks are maintaining a minimum cash balance of the deposits.
2) It makes sure that people from all backgrounds receive loans and not only the rich, powerful businessman and traders.
3) The above point is made sure by periodical statements given by the banks to the RBI that contains information about to whom the bank has given loan, at which interest the loan was given,etc.
This is necessary so as to maintain equality of who receives the loans. Our aim is that all industries should grow. Even the small scale industries should be given the advantages of loans . As a result, the country's economy will also grow.
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