Consider the following statements and identify the right ones.i. RBI a...
RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.
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Consider the following statements and identify the right ones.i. RBI a...
Introduction:
The Reserve Bank of India (RBI) is the central banking institution of India, and it plays a crucial role in the Indian financial system. It is responsible for various functions, including acting as a clearinghouse for commercial banks and granting licenses for setting up banking operations.
Statement i: RBI acts as a clearing house for commercial banks
The clearinghouse is an intermediary entity that facilitates the settlement of payments between banks. It ensures the smooth transfer of funds between different banks. The RBI acts as a clearinghouse for commercial banks in India. When one bank needs to transfer funds to another bank, the RBI plays a vital role in facilitating this process. It helps in the efficient clearing and settlement of interbank transactions, which ultimately contributes to the stability of the banking system.
Statement ii: RBI grants licenses for setting up banking operations
Another significant function of the RBI is to regulate and supervise the banking sector in India. As part of this role, the RBI has the authority to grant licenses for setting up banking operations. This means that any entity wishing to establish a bank in India needs to obtain a license from the RBI. The RBI carefully evaluates the applicant's eligibility, financial strength, and adherence to regulatory requirements before granting the license. By doing so, the RBI ensures that only those entities that meet the necessary criteria and can contribute to the stability and growth of the banking sector are allowed to operate as banks in India.
Conclusion:
In conclusion, both statements i and ii are correct. The RBI acts as a clearinghouse for commercial banks, facilitating the settlement of payments between banks. Additionally, it grants licenses for setting up banking operations, ensuring that only eligible and capable entities are allowed to operate as banks in India. These functions are crucial for maintaining the stability and efficiency of the banking system in the country.
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