With reference to the role of the Reserve Bank of India (RBI), consider the following statements: 1. It monitors the banks in actually maintaining the cash balance. 2. It ensures that banks give loans only to profit-making businesses and traders. 3. It requires banks to submit periodic information regarding their lending activities. Which of the statements given above is/are correct?

The correct option is 1 and 3 only Explanation The Reserve Bank of India (RBI) acts as the central bank and the primary regulator of the Indian banking system. Its supervisory functions ensure financial stability, the safety of depositors' funds, and the alignment of banking activities with national economic goals. Statement-wise Analysis: - Statement 1 is Correct: The RBI monitors commercial banks to ensure they maintain the required cash balance, specifically the Cash Reserve Ratio (CRR). Banks are legally mandated to keep a specific fraction of their Net Demand and Time Liabilities (NDTL) as cash with the RBI to ensure liquidity and solvency. - Statement 2 is Incorrect: The RBI does not restrict banks to lending only to profit-making businesses and traders. On the contrary, the RBI mandates Priority Sector Lending (PSL), requiring banks to lend a specific portion of their credit to sectors such as agriculture, Micro, Small and Medium Enterprises (MSMEs), education, and housing. This ensures credit availability to underserved sectors essential for development, irrespective of pure profit motives. - Statement 3 is Correct: The RBI requires banks to submit periodic reports and returns regarding their lending activities, deposit mobilization, and financial health. This reporting mechanism allows the RBI to supervise credit flow, monitor compliance with regulations, and assess systemic risk. Key Takeaway: The RBI regulates banks to ensure they maintain necessary liquidity (CRR/SLR) and directs credit flow to diverse sectors (including non-corporate sectors via PSL), rather than limiting lending solely to profit-oriented enterprises.

NCERT Class 10 Economics — Chapter 3: Money and Credit

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With reference to the role of the Reserve Bank of India (RBI), consider the following statements:

It monitors the banks in actually maintaining the cash balance.
It ensures that banks give loans only to profit-making businesses and traders.
It requires banks to submit periodic information regarding their lending activities.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B1 and 3 only
C2 only
D1 and 2 only

Did you get this right?

Solution

The correct option is 1 and 3 only

Explanation

The Reserve Bank of India (RBI) acts as the central bank and the primary regulator of the Indian banking system. Its supervisory functions ensure financial stability, the safety of depositors' funds, and the alignment of banking activities with national economic goals.

Statement-wise Analysis:

Statement 1 is Correct: The RBI monitors commercial banks to ensure they maintain the required cash balance, specifically the Cash Reserve Ratio (CRR). Banks are legally mandated to keep a specific fraction of their Net Demand and Time Liabilities (NDTL) as cash with the RBI to ensure liquidity and solvency.
Statement 2 is Incorrect: The RBI does not restrict banks to lending only to profit-making businesses and traders. On the contrary, the RBI mandates Priority Sector Lending (PSL), requiring banks to lend a specific portion of their credit to sectors such as agriculture, Micro, Small and Medium Enterprises (MSMEs), education, and housing. This ensures credit availability to underserved sectors essential for development, irrespective of pure profit motives.
Statement 3 is Correct: The RBI requires banks to submit periodic reports and returns regarding their lending activities, deposit mobilization, and financial health. This reporting mechanism allows the RBI to supervise credit flow, monitor compliance with regulations, and assess systemic risk.

Key Takeaway: The RBI regulates banks to ensure they maintain necessary liquidity (CRR/SLR) and directs credit flow to diverse sectors (including non-corporate sectors via PSL), rather than limiting lending solely to profit-oriented enterprises.

Your note

More from Chapter 3: Money and Credit

Consider the following statements regarding the impact of high cost of borrowing: 1. A larger part of the earnings of the borrowers is used to repay the loan. 2. The repayment amount is always less than the income of the borrower. 3. It may discourage people from starting enterprises due to the debt burden. Which of the statements given above is/are correct?

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Consider the following statements regarding the 'Cheque' facility: 1. The payee instructs the bank to withdraw money from the payer's account. 2. It allows for the direct settlement of payments without the use of cash. 3. Cheques are a form of currency issued by the RBI. Which of the statements given above is/are correct?

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With reference to the credit needs in rural areas, consider the following statements: 1. The main demand for credit is for crop production. 2. There is no time gap between buying inputs and selling the crop. 3. Repayment of the loan is crucially dependent on the income from farming. Which of the statements given above is/are correct?

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Consider the following statements regarding the 'Krishak Cooperative': 1. It does not accept deposits from its members. 2. It uses deposits as collateral to obtain a large loan from the bank. 3. It provides loans for various purposes including house construction. Which of the statements given above is/are correct?

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Consider the following statements regarding the supervision of credit activities in India: 1. The World Bank supervises the functioning of formal sources of loans. 2. There is no organisation that supervises the credit activities of lenders in the informal sector. 3. Banks are not required to share any lending information with the RBI. Which of the statements given above is/are correct?

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Keep practising Chapter 3: Money and Credit

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The correct option is 1 and 3 only

Explanation

Statement-wise Analysis:

Statement 1 is Correct: The RBI monitors commercial banks to ensure they maintain the required cash balance, specifically the Cash Reserve Ratio (CRR). Banks are legally mandated to keep a specific fraction of their Net Demand and Time Liabilities (NDTL) as cash with the RBI to ensure liquidity and solvency.
Statement 2 is Incorrect: The RBI does not restrict banks to lending only to profit-making businesses and traders. On the contrary, the RBI mandates Priority Sector Lending (PSL), requiring banks to lend a specific portion of their credit to sectors such as agriculture, Micro, Small and Medium Enterprises (MSMEs), education, and housing. This ensures credit availability to underserved sectors essential for development, irrespective of pure profit motives.
Statement 3 is Correct: The RBI requires banks to submit periodic reports and returns regarding their lending activities, deposit mobilization, and financial health. This reporting mechanism allows the RBI to supervise credit flow, monitor compliance with regulations, and assess systemic risk.