Question

in what ways the RBI supervise the functioning of banks? why is this necessary

Answer 1

RBI supervises the Indian banks in the following manner:

(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.

because-
no bank can issue thier own notes or any othe currency.
rbi is the one which controls and manages all the subordinate banks in country
so that any other bank does not set up its own interest rates on loans and other debts...

Answer 2

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.

(iv) 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.