which government body supervises the functioning of formal sources of loans in India ? explain its functioning.
Answers
Answer:
The Reserve Bank of India supervises the functioning of formal sources of loans in India. For instance, banks maintain a minimum cash balance out of the deposits they receive.
Functions of Reserve Bank of India The Reserve Bank of India monitors that the banks actually maintain this cash balance. Similarly, the Reserve Bank of India ensures that the banks give loans not just to profit-making businesses and traders, but also to small cultivators, small scale industries, small , borrowers, etc.
Periodically, banks have to submit information to the Reserve Bank of India on how much they are lending, to whom, at what interest rate, etc.
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Explanation:
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. This is done by periodical statements submitted by banks to RBI which contain information regarding how much the banks are lending to whom, at what rate of interest, etc.
(c) This supervision is necessary to ensure that equality is preserved in business and industry so that small industries also grow. Also, RBI makes sure that banks do not loan out more money than they are supposed to, as this can lead to crisis situations. An example is the great depression of the 1930s, as it affected the world economy.