How does Reserve Bank of India play crucial role in controlling the formal sector loans? Explain

money-and-credit

#1

How does Reserve Bank of India play crucial role in controlling the formal sector loans? Explain.


#2

The Reserve Bank of India (Reserve Bank of India) supervises the functioning of formal sources of credit/loan in India. Reserve Bank of India is the Central Bank of India.
Reserve Bank of India supervises the functioning of banks in the following ways
(i) Commercial Banks are required to hold part of their cash reserves with Reserve Bank of India, besides maintaining a minimum cash balance out of the deposits they receive.
(ii) Reserve Bank of India sees that the banks give loans not just to profit making business and traders but also to small cultivators, small-scale industries to small borrowers, etc.
(iii) Banks have to submit the lending information details to the Reserve Bank of India to ensure that the bank give loans to all kinds of customers.