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In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?
(1) The Reserve Bank of India is the central bank of India, which oversees and controls the credit provided by the formal sector.
(2) It supervises the affairs of the Bank in the following ways-
(i) The Reserve Bank of India monitors that banks carry a minimum cash portion of their deposits. Nowadays, banks in India keep 15% of the total deposits with them in the form of cash.
(ii) The Reserve Bank also keeps an eye on the fact that banks are not only providing loans to profit making businessmen and traders, but are also providing loans to small farmers, small borrowers.
(iii) From time to time, the banks have to give information to the Reserve Bank about how much loan and to whom they are giving loan and what their interest rates are.
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