Of course, a well-regulated and  2  BIS Review 137/2007  efficient banking sector also enhances the allocative efficiency of the financial system, thereby facilitating economic growth.
In this backdrop, as the functions of the RBI evolved over the years, the focus of its role as a regulator and supervisor of the banking system has shifted gradually from micro regulation to macro prudential supervision. A journey through the major landmarks in the evolution of the RBI’s role vis-à-vis the commercial banks provide interesting insights.