Explain the role of Reserve Bank in Indian economy.

(i) The Reserve Bank of India mints currency on behalf of the Government of India.

(ii) The Reserve Bank of India supervises the functioning of formal sources of loans.

(iii) The RBI monitors the banks in maintaining cash balance. The banks have to maintain a minimum cash balance out of the deposits they receive.

(iv) 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, to small borrowers etc.

(v) The RBI ensures that cheap and affordable credit is available to everyone. Cheap and affordable credit is crucial for the country’s development.

(vi) Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.