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प्रश्न
Read the given extract carefully and answer the following questions.
| Mr. X wanted to buy an expensive motorcycle for his son but he did not have sufficient money to buy it. He approached a public sector commercial bank for the loan. The bank asked Mr. X to deposit 20% cash of the loan amount and rest 80% of the loan amount was given by the bank. |
- Briefly explain a Commercial Bank.
- What is the regulation of consumer credit in selective credit control?
- Name the bank which controls all the commercial banks and financial institutions in the country.
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उत्तर
- Commercial bank is defined as an organisation that accepts demand deposits and uses the deposited money to lend to the general public.
- The regulation of consumer credit involves laying down rules regarding payments and maintaining maximum number of instalment credits for the purchase of specified durable consumer goods.
Thus, consumer credit employs two aspects:
- Minimum down payment, and
- Maximum period of payment.
- Central Bank (Reserve Bank of India in case of India) controls all the commercial banks and financial institutions in our country.
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संबंधित प्रश्न
Explain the credit creation role of commercial banks with the help of a numerical example.
Answer the following question.
What role does it play in determining the credit creation power of the banking system? Use a numerical illustration to explain.
______ is the main source of money supply in an economy.
Credit creation by the commercial bank is determined by ______.
Access to adequate and timely credit at affordable rates is critical for the rural poor to alleviate high cost debt and invest in livelihood opportunities. Despite the Government of India's best efforts, financial inclusion of the rural poor has been beset with multiple challenges. Lack of adequate banking infrastructure and human resources in rural areas, unplanned expansion leading to unviable bank branches and low levels of financial literacy amongst the rural populace have been some of the key challenges.
The most vulnerable communities, who often had no formal credit history or ability to provide collateral, have often been the worst affected. Inability to access loans from banks meant that the poorest had to resort to moneylenders for loans at unreasonably high rates of interest that invariably led them into a toxic debt trap.
In this context, the SHG-Bank Linkage programme, formalised by the National Bank for Agriculture and Rural Development (NABARD) in 1995, synthesizes 'formal financial systems' (in terms of a formal institution providing credit) with the 'informal sector' (comprising of rural poor with no formal credit history), has emerged as a preferred vehicle for providing financial services to the hitherto unbanked poor.
Community Based Repayment Mechanisms (CBRMs) have been institutionalised at branches involved in financing SHGs to monitor and ensure timely repayment of loans by SHGs. The number of SHGs with outstanding bank loans stands at nearly 5 million today, implying that the program has brought formal banking services to over 50 million women.
There are two statements given below, marked as Assertion (A) and Reason (R). Read the statements and choose the correct option.
Assertion (A): Micro-credit can help empower women and make them financially independent.
Reason (R): Micro-credit involves small loans provided at reasonable interest rates that can help people start their own ventures.
Explain the role of legal reserve ratio and Bank rate in correcting inflationary gap in an economy.
''The process of credit creation by commercial banks comes to an end when the total of required reserves become equal to the initial deposits."
With the help of a numerical example, prove that the given statement is true.
Identify which of the following Statement is true?
Deposits made by the people from their own resources are called ______.
If legal reserve ratio is 20%, the value of money multiplier would be ______.
Credit money is increased when CRR:
Match the following and select the correct option.
| Column A | Column B | ||
| (i) | A deposit created by a customer | A. | Term deposit |
| (ii) | A deposit created by bank when loan is granted | B. | Demand deposits |
| (iii) | Deposits payable by bank on demand | C. | Initial deposit |
| (iv) | Deposits the amount of which can be withdrawn only after a fixed period of time | D. | Secondary deposit |
Which of these banks formulates the credit control tools?
Match the following:
| Column I | Column II | ||
| A. | Formula of Money Multiplier | (i) | Inverse |
| B. | Money multiplier = 4 | (ii) | Money multiplier = 10 |
| C. | Relationship between LRR and money multiplier | (iii) | LRR = 0.25 |
| D. | LRR = 0.1 | (iv) | `1/"LRR"` |
What is meant by credit creation?
State the advantage of a credit card over currency notes.
What are secondary (derivative) deposits?
Why are the banks required to keep only a fraction of deposits as cash reserves?
Which factor most directly limits credit creation?
Poor banking habits limit credit creation by ______.
