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प्रश्न
Briefly explain two qualitative methods of credit control adopted by this institution.
Explain any three methods of qualitative credit control.
Discuss the qualitative methods of controlling credit by the central bank in an economy.
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उत्तर
The methods used by the RBI to influence the flow of credit in particular directions of the economy are called qualitative methods. The two qualitative methods of credit control are as follows:
- Margin Requirements: A margin is the difference between the amount of the loan and the market value of the security offered by the borrowers against the loan. By changing the margin requirement, the central bank can alter the amount of loans made against securities by the banks.
- Rationing of Credit: Rationing of credit means fixation of credit quotas for different sectors of the economy.
- Moral Suasion: Under this method, the central bank adopts the policy of persuasion and moral influence on the commercial banks in order to get them to fall in line with its policy. The central bank frequently announces its policy and urges the commercial banks to adopt it.
- Publicity: Publicity is another method of selective credit control. The central bank expresses its views about the conditions prevailing in the economy relating to money supply prices, production, employment, etc., to put moral pressure on the banks. It may put forward its views by using facts and figures through the media of publicity. The central bank uses this method both for influencing the credit policies of the commercial banks and to influence the public opinion in the country.
- Direct Action: Direct action refers to various directives issued by the central bank to commercial banks from time to time to regulate their lending and investment activities. The central bank can take direct actions against commercial banks.
- Regulation of Consumer Credit: An important instrument of selective credit control is the regulation of consumer credit. It aims at regulating the consumer instalment credit on hire purchase finance. Hire purchase finance is the method of using bank credit by the consumers to buy expensive, durable consumer goods like motor cars, computers, etc.
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संबंधित प्रश्न
Which of the following is a selective/qualitative method of credit control.
The rate of which commercial banks borrow from the Central Bank is the:
During deflation, the Central Bank usually ______.
The central bank controls credit _____ .
In order to encourage investment in the economy, the central bank may ______.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
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.
Give any two reasons as to why a country needs a central bank.
Define the term Statutory Liquidity Ratio.
Differentiate between quantitative and qualitative methods of credit control.
Briefly explain the following credit control method adopted by the Central Bank.
Publicity
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.
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.
What are quantitative methods of credit control?
What is meant by Legal Reserve Ratio?
Define moral persuasion.
Describe two quantitative credit control measures of the Central Bank.
