The Reserve Bank of India regulates the commercial banks in matters of - 1. Liquidity of assets 2. Branch expansion 3. Merger of banks 4. Winding-up of banks Select the correct answer using the codes given below.

QUESTION

Medium

Economy

Prelims 2013

The Reserve Bank of India regulates the commercial banks in matters of -

Liquidity of assets
Branch expansion
Merger of banks
Winding-up of banks

Select the correct answer using the codes given below.

Select an option to attempt

Explanation

The Reserve Bank of India (RBI) regulates commercial banks in all of the following matters

Liquidity of assets The RBI uses various tools like Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to ensure banks maintain a certain level of liquid assets to meet withdrawal demands and facilitate smooth functioning of the financial system.

Branch expansion The RBI grants licenses to banks for opening new branches to ensure wider access to banking services across the country, particularly in underserved areas.

Merger of banks Mergers can be a way to strengthen the banking sector. The RBI carefully evaluates proposed mergers to ensure financial stability and protect depositors' interests.

Winding-up of banks In case a bank experiences severe financial difficulties and poses a risk to the system, the RBI, in consultation with the government, can initiate the process of winding up the bank to protect depositors and maintain financial stability.

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