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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
Briefly explain two qualitative methods of credit control adopted by this institution.
Define qualitative credit control policy of the RBI.
During deflation, the Central Bank usually ______.
______ is a quantitative method of credit control.
Which of the following is not a quantitative method of credit control?
In order to encourage investment in the economy, the central bank may ______.
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:
What is meant by open market operations?
State the impact of an increase in Cash Reserve Ratio on loanable funds.
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.
Who controls the credit supply in an economy?
What is the credit supply policy in an economy called?
Identify the following Credit Control measure undertaken by the Central Bank during inflation.
The Central Bank sells government approved securities to the public.
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
