Regulating Commercial Banks is a principal function of RBI. It ensures that the commercial banking scene in India stays as heterogenous as possible.

And that is why we have Public Sector Banks (PSBs), Private Sector Banks, MNC Banks, Small Finance Banks, Payment Banks, Regional Rural Banks, Local Area Banks, All India Financial Institutions and an Indian Postal Bank.

RBI does this with a simple, one point goal in view: protecting customer interest. That there must be so much competition to ensure a customer has wide choice and that it is not arm twisted. Be it a depositor or a borrower. To safeguard the customer interests, it applies ‘prudential norms’ derived from best practises of the best banks from world over.

While playing its role as a regulator of the commercial banks, RBI is guided by its below mentioned policy guidelines:

1. It is the sole licensing authority for opening of banks in India
2. It is the sole authoriser for opening bank branches in India
3. It is the sole authority to allow MNC Banks’ entry in India or Indian banks’ entry abroad
4. It is the sole authority to allow expansion of MNC banks in India or Indian banks abroad
5. It supervises implementation of BASEL II and BASEL III (to be completely implemented by 31/03/2019) prudential norms by the banks
6. It monitors SLR and CRR by banks
7. It is the ultimate supervisor of KYC and Anti Money Laundering (AML) norms
8. It enforces policies and guidelines for customer service and customer related issues
9. It supervises amalgamation, reconstruction and liquidation of banking companies
10. It enforces resolution mechanisms between banks or between the bank and the customer
11. Management and supervision of Non Performing Assets and necessary action wherever needed

This is RBI’s constant endeavour that the confidence of the Indian public in the banking system should be maintained.