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प्रश्न
Explain how credit rationing helps to control credit in an economy.
How is ‘rationing of credit’ used as a method to control credit in the economy?
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उत्तर
Credit rationing is a qualitative credit control method used by central banks to limit the maximum amount of loans available to specified industries or commercial banks.
- Ceiling on Loans: The Central Bank sets a strict loan ceiling for specified industries or commercial banks. Once this limit is reached, banks are unable to make additional loans to that sector, even if borrowers are ready to pay higher interest rates.
- Sector-Specific Allocation: It directs loans to priority sectors (such as agriculture or small businesses), while depriving speculative or non-essential sectors of extra funds.
- Controls Inflation: By restricting the absolute amount of credit that commercial banks can create, it directly reduces the total money supply and purchasing power in the economy, effectively lowering inflationary pressure.
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संबंधित प्रश्न
The rate of which commercial banks borrow from the Central Bank is the:
The difference between the value of security and the amount of loan sanctioned against these securities is known as:
The process of buying and selling of securities by the central bank of a country is known as ______.
Observe the relationship of the first pair of words and complete the second pair.
Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank :
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Increase in cash reserve ratio adversely affects the capacity of commercial banks to create credit.
Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Bank rate is a quantitative instrument of monetary policy.
Reason (R): During inflation, RBI reduces the bank rate.
Define the term Statutory Liquidity Ratio.
State the impact of an increase in Cash Reserve Ratio on loanable funds.
Differentiate between quantitative and qualitative methods of credit control.
Define the following term:
Cash Reserve Ratio.
Central bank is the lender of the last resort. Explain.
The Central Bank is the apex monetary institution of the country. Explain its role of a custodian of foreign exchange reserves.
Explain the following function of the central bank of a country.
Fixation of margin requirement on secured loans.
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
What is the credit supply policy in an economy called?
What do you mean by credit control?
What are quantitative methods of credit control?
Which are qualitative methods of credit control?
What is meant by Legal Reserve Ratio?
