The Reserve Bank of India supervises the functioning of banks in which of the following ways 1 RBI m...........

Economic Affairs Types of Banks and Banking

The Reserve Bank of India supervises the functioning of banks in which of the following ways?

1. RBI monitors the banks so that they maintain prescribed cash balance.

2. RBI by its mandate prohibits banks from earning excessive profits.

3. RBI supervises the credit activities of lenders in the informal sector.

4. RBI ensures that bank loans are diverted towards priority sectors to achieve inclusive growth.

Select the correct answer using the codes below.

2, 3 and 4 only

2 and 3 only

1 and 4 only

1, 2, 3 and 4

Explanation :

Banks maintain a minimum cash balance out of the deposits they receive.
The RBI monitors the banks in actually maintaining cash balance.
Statement 2 is very extreme.
There is no such mandate which prohibits banks from earning excessive profits.
There is no organisation which supervises the credit activities of lenders in the informal sector.
They lend at arbitrary interest rates.
Similarly, the RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.
Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.