In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Ways RBI Supervises Banks and Why it’s Important:

1. Regular Checks: RBI regularly checks banks to see if they are working properly. This helps ensure that banks are following rules, managing risks, and running smoothly.

2. Watching from Afar: RBI also keeps an eye on banks by looking at their financial reports and data. This helps them spot any problems or risks even without visiting the banks.

3. Setting Rules: RBI makes rules and guidelines that banks must follow, like having enough money in case things go wrong. These rules make sure banks are financially strong and safe.

4. Giving Licenses: RBI decides which new banks can start operating. They check if new banks are trustworthy and meet all the requirements before allowing them to open.

5. Helping Troubled Banks: If a bank is not doing well, RBI steps in to help fix the problems. They might ask the bank to make changes so it becomes healthy again.

6. Testing for Problems: RBI checks if banks can handle tough situations. This helps prevent big problems in the banking system and keeps banks stable.

7. Protecting People: RBI makes sure banks treat customers fairly and solve their complaints. This protects people’s money and ensures good service from banks.

RBI supervises banks to make sure they work properly, follow rules, and keep people’s money safe. This helps maintain trust in banks and keeps the entire banking system strong and stable.