Functions & roles of financial institutions

Last month you paid your college fee by UPI, your father paid the electricity bill with a cheque, and your aunt's fixed deposit matured and was renewed. Three ordinary acts, three different services from three kinds of institution. Behind them the Reserve Bank is deciding how much cash each bank must hold and what it may lend against. What exactly do financial institutions do in the economy, and which part of that is the law's business?

In two minutes

Banks take deposits and lend (s.5(b)), offer the payment and agency services listed in s.6(1); the Reserve Bank issues notes, acts as the government's and banks' banker and controls credit and banks (RBI Act ss.17, 20–22, 42; BR Act ss.21, 35A); NBFCs and asset reconstruction companies supply credit and handle stressed assets.

The rest of this chapter

The full explanation, the cheat sheet, every previous-year question at every mark weight, the quiz and the answer skeletons are part of Law of Banking and Negotiable Instruments on LexBlox Semester. Sign in to unlock the subject, or read Module 1 of Legal Language and Writing free.