Answer :

The Reserve Bank of India supervises the functioning of formal sources of loans. Its functions are-

1. Maintains a minimum cash balance to avoid cash shortages in the country.

2. Ensures that the banks give loans not just to private profit-making businesses and traders. As the central bank, it is the responsibility of the RBI to ensure equality by making sure that small cultivators, small scale industries, to small borrowers etc. also get loans.

3. Collects information from the banks on how much they are lending, to whom, at what interest rate, etc.

Explanation: The Reserve Bank of India acts as a supervisor to the banks, and makes sure that the loans are proportionally distributed among the small and large business establishments.

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