In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?
The Reserve Bank of India supervises the functioning of formal sources of loans in banks. The banks have to maintain a minimum cash balance out of the deposits they receive. The RBI monitors that the banks actually maintain the cash balance. The RBI also sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, and to small borrowers. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, and at what interest rate.
In situations with high risks, credit might create further problems for the borrower. Explain.
Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.
In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.
How does money solve the problem of double coincidence of wants? Explain with an example of your own.
In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?
In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?