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प्रश्न
Explain how credit rationing helps to control credit in an economy.
Explain how margin money helps to control credit in an economy.
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उत्तर
- Credit Rationing - In this method, the 'Central Bank' imposes restrictions on demand of accommodation for more credits by the commercial banks. The 'Central Bank' limits the credit available to each of the commercial banks. Thus, this method of credit rationing directly affects the credit-granting (lending) capacity of commercial banks.
- Margin money - Margin requirement is a credit management tool utilized by institutions like banks. It represents the collateral amount a borrower must furnish to secure a loan, usually stated as a percentage of the entire transaction value. Implementing a margin requirement allows the lender to control the extent of credit extended to the borrower or trader. To mitigate credit, the RBI can raise the margin requirement.
Notes
Students should refer to the answer according to their questions.
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संबंधित प्रश्न
The process of buying and selling of securities by the central bank of a country is known as ______.
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.
Define the term Statutory Liquidity Ratio.
State the impact of an increase in Cash Reserve Ratio on loanable funds.
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
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.
Which are qualitative methods of credit control?
Describe two quantitative credit control measures of the Central Bank.
