RBI supervises the functioning of banks as follows
(i) The RBI checks that the banks
actually maintain a minimum cash balance out of the deposits they receive
(currently this is 15%).
(ii) The banks have to periodically submit information to the RBI on
how much they are lending, to whom, at what interest rate, etc. Thus, the RBI
ensures that the banks give loans not just to profit-making businesses and
traders, but also to small cultivators and other small borrowers.
This supervision is necessary to ensure that small businesses
also grow, besides others. Further, this monitoring ensures that banks do not
loan more money than they are supposed to, as such an action can create a
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