Q: How does RBI control other banks ?

Ans: The Reserve Bank of India (RBI) takes its name from the Banking Regulation Act, 1949, formerly known as the Banking Companies Act, 1949. Regional rural banks, cooperative banks, Commercial banks, local area banks, non-banking financial companies and development financial institutions (DFIs) make up India’s financial system. In this article, we attempt to understand the role of RBI as a regulator and how it safeguards public trust in the national financial system. The aim of the Reserve Bank of India is to provide the best facilities to all banks of India. It settled with the National Payments Corporation of India for settling the payment system throughout the country. 
Role of RBI
The primary duty of the RBI is to implement monetary policy
The Central Government’s Monetary Policy Committee (MPC), established under Section 45(B), determines the policy interest rate required to achieve the inflation target
The RBI also conducts economic research to promote economic growth
It is in charge of the nation’s currency’s design, production, and overall management, ensuring an adequate supply of clean and genuine notes
Section 22 of the RBI Act empowers the bank to issue currency notes, except for one rupee note, which the Ministry of Finance issues
The Government of India is the coin-issuing authority, and the Reserve Bank receives coins on demand.
According to Section 20 of the Reserve Bank of India Act 1934, the RBI must handle the Central Government’s receipts and payments and carry out the exchange, remittance, and other banking operations, including managing the Union’s public debt. Furthermore, according to Section 21 of the said Act, the RBI can conduct Union Government business in India. RBI conducts all the transactions which are held between the two State Governments. Section 21 A facilitates the agreement which was held between two state governments before any transactions. 
The function of the RBI as a regulator of the money market is to regulate and manage the country’s foreign exchange. 
It is in charge of the country’s currency and gold reserves. 
The foreign exchange rate reflects the demand for and supply of foreign exchange resulting from trade and capital transactions on any given day. 
RBI works as a regulator of the money market. It also regulates the Financial Markets Department (FMD). It also checks and regulates all the functions which are done under the foreign exchange market. It facilitates this foreign regulation by selling and buying foreign currency, which helps in reducing the volatility during the time of excess demand for foreign currency in the market. 
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