What are the powers of RBI over the commercial banks?

The Banking Regulation Act, 1949 empowers the Reserve Bank of India to inspect and supervise commercial banks. These powers are exercised through on-site inspection and off site surveillance.

How are commercial banks controlled?

Liquidity Ratio/Cash Rate: The commercial banks are mandated by the government to keep a special proportion, e.g. 25\% of their total deposit with the central bank in order to control their volume of credit. By lowering or raising the rate, the central bank can control the activities of the commercial banks.

How RBI exercises control over other banks?

The RBI lends money to the other banks in the country at different interest rates. And the repo or repurchase rate is one such interest rate that acts as a benchmark for all the other interest rates. The period for which the bank lends at the Repo Rate is 90 days at the most.

Who regulates and controls the commercial banks in India?

Ravi Srikant has two years of experience as assistant VP of FinFirst Capital. He is currently an investment manager for the Muthoot Family Office. The banking system in India is regulated by the Reserve Bank of India (RBI), through the provisions of the Banking Regulation Act, 1949.

Who regulates and controls the commercial bank?

The Federal Reserve supervises and regulates many large banking institutions because it is the federal regulator for bank holding companies (BHCs).

How does RBI exercise control over commercial banks?

Protection of Small Depositors RBI has set up the Deposit Insurance and Credit Guarantee Corporation (DICGC) to protect the interest of small depositors, in case of bank failure. The DICGC provides insurance cover to all eligible bank depositors up to Rs. 1 lakh per depositor per bank.

What does RBI control?

The RBI controls the monetary and other banking policies of the Indian government. The Reserve Bank of India (RBI) was established on April 1, 1935, in accordance with the Reserve Bank of India Act, 1934. The Reserve Bank is permanently situated in Mumbai since 1937.

Who is the regulator of commercial banks?

The primary banking regulator in India is the Reserve Bank of India (RBI). The RBI has wide-ranging powers to regulate the financial sector.

How does the Reserve Bank of India regulate the commercial banks and the the financial institutions of our country through its functions?

RBI controls the credit created by the commercial banks in India, in accordance with the economic priorities of the government of India. RBI uses quantitative and qualitative methods to control and regulate the flow of money in the market. The monetary policy involves the management of interest rates and money supply.