Question

Why is banking regulation important? What are the burden of regulations associated with it?

Answer 1

Importance of banking regulations :

1) Protection of depositors : Regulations is necessary to monitor banks on behalf of depositors which provides assurance & maintaines their confidence in the financial system.

2) It gives power to RBI to licence the banks and regulation of shareholding.

3) It laids down the direction for audits to be managed by RBI, control merging & liquidation.

4) Co-operative banks were incorported under this act.

5) It plays the important role in the development of national economies.

Burden associated with banking regulations :

a) Reporting overload

b) Know your customer requires bank to accumulate more data on their clients.