Question

How is RBI controlling the commercial banks?

Answer 1

RBI controls the commercial banks viavarious instruments like Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), Bank Rate, Prime Lending (PLR), Repo Rate, Reverse Repo Rate and fixing the interest rates and deciding the nature of lending to various sectors. These are those ratios and rates that are fixed by RBI and it is mandatory for all the commercial banks to follow or maintain these rates. All these measures control the commercials banks' operations and also control money supply in Indian economy.