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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 bank rate.
Briefly explain two qualitative methods of credit control adopted by this institution.
Which of the following is a selective/qualitative method of credit control?
The central bank controls credit _____ .
Bank rate is the rate at which:
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:
Give any two reasons as to why a country needs a central bank.
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 are quantitative methods of credit control?
Which are qualitative methods of credit control?
What is meant by Legal Reserve Ratio?
Define moral persuasion.
