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RBI rules(regulation policies) for commercial bank

RBI controls the commercial banks through the following measures:

  1. Fixes the Bank Rate and Repo Rate Bank rate.
  2. Variable Reserve Ratios.
  3. Fixing Margin Requirements
  4. Credit Rationing

Those who are preparing the RBI bank Preparation exam and read the rules and regulations for commercial banks

RBI policies on commercial banks

 RBI extended the banking facilities; strengthen the commercial banks in the country. It also extended the functional areas of the bank. There are some policies for the commercial banks are as follows:-

  • Licensing Requirements
  • Corporate Governance in Banks
  • Statutory Pre-emptions
  • Interest Rates
  • Prudential Norms
  • Disclosure Norms
  • Anti-Money Laundering Norms
  • Protection of Small Depositors
  • Para – banking Activities
  • Annual Onsite Inspection

Corporate Governance in Banks

One of the main objectives of RBI is to ensure high quality commercial power in banks. RBI has issued the guidelines for “fit and proper “criteria for the director of banks. In the guidelines is that the directors of the banks should have the knowledge and experience in the various banking areas.RBI can also appoint additional directors to the board of a banking company.

Statutory Pre-emptions

Each commercial bank is required to maintain certain parts of their Net Demand and Time Liabilities (NDTL) in the form of cash with the RBI called CRR (Cash Reserve Ratio) and in the form of securities called SLR (Statutory Liquidity Ratio). These are called statutory Pre-emptions.

Prudential Norms

Prudential norms means to responsible norms maintained by the banks. RBI issues these norms to be followed by commercial banks to strengths the balance sheet of banks. Some of them are related to income recognition, asset classification and provisioning, capital adequacy, investments portfolio and capital market exposures. RBI has issued its guidelines under the Basel II for risk management.

Disclosure Norms

One of the most necessary tools for marketing discipline is to maintain public disclosure of relevant information. According to RBI, the banks are maintained the disclosures of their annual reports and some other documents with their capital capability, asset quantity, earning aspects and penalties imposed on them by the regulator.

Anti-Money Laundering Norms

KYC norms (Know Your Customer), Anti- Money Laundering (AML) and Combating Financing of Terrorism (CFT) guidelines are some of the major issues on which RBI keeps issuing its norms and guidelines.

Para – banking Activities

Para banking activities are those activities which do not comes under the traditional banking activities. Like asset management, mutual funds business, insurance business, merchant banking activities, factoring services, venture capital, card business, equity participation in venture funds and leasing. The RBI has permitted banks to undertake these activities under the guidelines issued by it from time to time.

Annual Onsite Inspection

RBI starts annual onsite inspection of banks to measures their financial health and performance in the terms of quality management, capital share, earnings as well as internal control system. On the inspections, banks rating based on the CAAMELS rating.   


It means that offsite surveillance and monitoring system. RBI wants to submit the bank details and organized information periodically on the OSMOS. According to the OSMOS, RBI examines the condition of the banks.

Here this article is related to :-

  • main function of rbi
  • regulations of rbi on commercial banks
Updated: October 11, 2017 — 8:56 am

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