Question

Which government body supervises the functioning of formal sources of loans in India? Explain its functioning.

Answer 1

Reserve Bank of India supervises the functioning of formal sources of loans in India.

• It issues currency notes on behalf of the central government. 
• It issues guidelines for fixing rate of interest on deposits and lending by banks. ,, 
• It ensures that banks should maintain a minimum cash balance out of the deposits they receive. 
• It ensures that the banks should give loans not only to profit making businesses but also to poor people and small traders. 
• Periodically, the banks have to submit a report to the RBI on how much they are lending, to whom and at what interest rate.