Question

RBI pramotes comercial banking by

Answer 1

Answer:

Under the Banking Regulation Act, 1949

Explanation:

Under the Banking Regulation Act, 1949, vast powers of supervision and control of commercial banks have been vested in the RBI.

The latter has tried to use these powers:

(a) To strengthen the commercial banking structure in the country through compulsory liquidation of weak banks or their amalgamation into stronger banks and through improvement in the operational standards of banks by regular inspection and general surveillance,

(b) To extend banking facilities throughout the country, especially in small towns and rural areas so as to improve the geographical coverage of banks, and

(c) To extend the functional coverage of banks so as to improve the sectoral distribution of bank credit in favour of the priority sectors such as agriculture, small-scale industries, etc. and make more of it available to small borrowers. The RBI has also arranged for the education and training of different categories of banking personnel.

To inspire greater public confidence in bank deposits and thereby spread banking habit in the country, particularly among the people of small means, insurance of deposits with commercial banks was introduced in January 1962 and a Deposit Insurance Corporation” was set up for the purpose as a subsidiary of the RBI.

In later years the scheme of deposit insurance has been gradually extended to eligible co-operative banks and regional rural banks as well. The amount of deposit eligible tor insurance cover in respect of each depositor in each bank has also been revised upward from Ume to time. Or July 1,990 it was fixed at Rs. 30,000. At the end of June 1995, 70% of total assessable deposits (of Rs. 4, 09,000 crores) of commercial and co-operative banks were insured.

Promotion of Rural (Agricultural) Credit:

The provision of adequate amounts of institutional credit for agricultural and other rural activities was recognized as one of the special responsibilities of the RBI even at the time of its birth and appropriate provisions were made to this effect in the Reserve Bank of India Act, 1934, a separate Agricultural Credit Department of the Bank constituted, and the development of co-operative credit move­ment (which from its inception in 1904 has remained a rural or agricultural movement) made the Bank’s special charge.

Much was not done in this sphere till about the mid 50s, when, on the recommendation of the All-India Rural Credit Survey Committee (1954), the (then) Imperial Bank of India and other state-associated banks were nationalised and converted into the State Bank of India and associate banks. This group was made responsible for a vigorous programme of branch expansion in rural areas with a view to provide rural credit as well as mobilise rural savings.