The Reserve Bank of India regulates the commercial banks in matters of – 1. Liquidity of assets 2. Branch expansion 3. Merger of banks 4. Winding-up of banks Select the correct answer using the codes given below.
Explanation
The Reserve Bank of India (RBI) regulates commercial banks in all of the following matters
Liquidity of assets: The RBI uses various tools like Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to ensure banks maintain a certain level of liquid assets to meet withdrawal demands and facilitate smooth functioning of the financial system.
Branch expansion: The RBI grants licenses to banks for opening new branches to ensure wider access to banking services across the country, particularly in underserved areas.
Merger of banks: Mergers can be a way to strengthen the banking sector. The RBI carefully evaluates proposed mergers to ensure financial stability and protect depositors' interests.
Winding-up of banks: In case a bank experiences severe financial difficulties and poses a risk to the system, the RBI, in consultation with the government, can initiate the process of winding up the bank to protect depositors and maintain financial stability.