The Reserve Bank of India (RBI) is the central bank of India. It is responsible for formulating and implementing monetary policy, regulating the banking system, and promoting financial stability.
The RBI also regulates non-banking financial institutions (NBFIs). NBFIs are financial institutions that do not have a banking license from the RBI. They include institutions such as:
- Housing finance companies
- Microfinance institutions
- Investment companies
- Asset management companies
- Factoring companies
- Leasing companies
The RBI regulates NBFIs to ensure that they are sound and well-managed. The RBI does this by:
- Licensing NBFIs
- Setting capital and liquidity requirements
- Conducting inspections
- Imposing penalties for violations
Here are some MCQs on the Reserve Bank as a Central Bank and Regulator of Non-Banking Financial Institutions/Banks:
- Which of the following is not a function of the Reserve Bank of India?
- Issuing currency
- Regulating the banking system
- Promoting financial stability
- Regulating non-banking financial institutions
- Providing loans to the government
- The answer is Providing loans to the government. The RBI does not have the power to provide loans to the government. This power is vested in the Ministry of Finance.
- Which of the following is not a non-banking financial institution?
- A commercial bank
- A housing finance company
- A microfinance institution
- An investment company
- The answer is A commercial bank. Commercial banks are regulated by the RBI as banking institutions.
- Which of the following is not a power of the Reserve Bank of India over non-banking financial institutions?
- Licensing
- Setting capital and liquidity requirements
- Conducting inspections
- Imposing penalties for violations
- Approving mergers and acquisitions
- The answer is Approving mergers and acquisitions. The RBI does not have the power to approve mergers and acquisitions of non-banking financial institutions. This power is vested in the Securities and Exchange Board of India (SEBI).