2013
Q. 42
Set A
Economy
Banking
The Reserve Bank of India regulates the commercial banks in matters of
- liquidity of assets
- branch expansion
- merger of banks
- winding-up of banks
Select the correct answer using the codes given below.
Smart Elimination
The regulator (RBI) needs full control to keep the system safe. It makes no sense for the regulator to control ""opening branches"" but not ""winding up"". Assume the regulator covers all aspects (1, 2, 3, and 4).
Potential Trap
Thinking RBI only regulates monetary policy and not 'winding up' or 'mergers'.
Answer Key & Explanation
Answer: DThe correct answer is Option D.
Explanation: Under the Banking Regulation Act, 1949, the RBI has extensive powers to regulate commercial banks:
- Liquidity of Assets: RBI stipulates SLR (Statutory Liquidity Ratio). (Correct)
- Branch Expansion: Banks need licenses/permission for opening new branches (though liberalized now, the power exists). (Correct)
- Merger of Banks: RBI plays a key role in the amalgamation and merger of banks to ensure stability. (Correct)
- Winding-up of Banks: RBI can apply to the High Court for the winding up of a banking company. (Correct)
Value Addition
- Section 22: Licensing of banks.
- Section 35A: Power to give directions.
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Difficulty Assessment
medium
Foundational question based on core concepts.