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Question
Explain the reason for the necessity of supervision by the Reserve Bank of India of formal sources of loans.
Solution
The RBI monitors that the banks actually maintain the cash balance. The RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small-scale industries, small borrowers, etc. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.
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