RBI has authority to regulate and administer the entire banking and financial system. Some of its supervisory functions are given below.
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Granting license to banks
The RBI grants license to banks for carrying its business. License is also given for opening extension counters, new branches, even to close down existing branches.
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Bank Inspection
The RBI grants license to banks working as per the directives and in a prudent manner without undue risk. In addition to this it can ask for periodical information from banks on various components of assets and liabilities.
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Control over NBFIs
The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. However RBI has a right to issue directives to the NBFIs from time to time regarding their functioning. Through periodic inspection, it can control the NBFIs.
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Implementation of the Deposit Insurance Scheme
The RBI has set up the Deposit Insurance Guarantee Corporation in order to protect the deposits of small depositors. All bank deposits below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit Insurance Scheme in case of a bank failure.