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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
Define qualitative credit control policy of the RBI.
During deflation, the Central Bank usually ______.
In order to encourage investment in the economy, the central bank may ______.
Bank rate is the rate at which:
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 :
During inflation, the central bank usually:
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.
What is meant by open market operations?
State the impact of an increase in Cash Reserve Ratio on loanable funds.
Define the following term:
Cash Reserve Ratio.
Explain the following function of the central bank of a country.
Fixation of margin requirement on secured loans.
What is the credit supply policy in an economy called?
Identify the following Credit Control measures undertaken by the Central Bank during inflation.
The Central Bank increases the rate at which it lends to the Commercial Bank.
Which are qualitative methods of credit control?
What is meant by Legal Reserve Ratio?
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
