The Reserve Bank of India supervises the banks. Supervision is practiced in the following ways: (i) The RBI monitors that banks actually maintain a certain percentage of their deposits as cash balance. (ii) The RBI supervises the functioning of formal sources of loans and also sees that banks give loans not 'just to make profits by giving them to traders and businessmen but also to fanners, small cultivators and small-scale industries. (iii) The rate of interest for formal lenders is decided by the RBI, so, normally the interest rates are very low. (iv) It is the RBI that issues the Cash Reserve Ratio and Statutory Liquidation Rate to commercial banks so as to maintain minimum cash reserves out of their deposits. (v) Periodic reports have to be submitted by all other banks to the RBI which should contain details such as how much they have lent, to whom, at what rate of interest, etc. (vi) The RBI is the lender of last resort. Whenever banks are short of funds, they can take loans from the RBI. Thus, it is a source of great strength to the banking system. (vii) The RBI also acts as a bank of central clearances, settlements and transfers.