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How does RBI control the functioning of other banks? Why it is important ?

  • the RBI supervises the functioning of banks
  • they see to it thet the banks maintain a cash balance
  • they see to it that the banks not only provides loans to the rich but also to the poor
  • banks submit a record to the RBI on how much they lend,to whome, and at what rate of  interest.
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 miss liz

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- RBI monitors the banks are actually maintaining cash balance.

- RBI collect information from banks, how much they are lending to whom,at what interest rate etc.
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- RBI monitors the banks are actually maintaining cash balance.

- RBI collect information from banks, how much they are lending to whom,at what interest rate etc.
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RBI controls the commercial banks viavarious instruments like Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), Bank Rate, Prime Lending (PLR), Repo Rate, Reverse Repo Rate and fixing the interest rates and deciding the nature of lending to various sectors. These are those ratios and rates that are fixed by RBI and it is mandatory for all the commercial banks to follow or maintain these rates. All these measures control the commercials banks' operations and also control money supply in Indian economy.

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