Question

What are objectives of credit control?

Give in brief objectives of credit control.

Answer 1

1. Price Stability: Sharp changes in prices can disrupt the economic system and lead to serious social problems. That’s why maintaining price stability is a key goal of the credit control policy. By managing the supply of credit, the central bank can help stabilize prices within the country.
2. Economic Stability: Business cycles cause instability in a capitalist economy. Therefore, the central bank’s credit control policy should aim to reduce these cyclical ups and downs and promote overall economic stability. This stability, in turn, should lead to sustained economic growth.
3. Maximum Employment: Unemployment leads to economic loss and social problems. Hence, achieving economic stability along with full employment and a high per capita income is regarded as a key goal of the country’s credit control policy.
4. Stabilisation of Money Market: The primary goal of the central bank’s credit management strategy is to stabilize the money market and limit interest rate swings. Credit management should be implemented so that the demand and supply of money are always balanced.
5. Exchange Rate Stability: Maintaining stable exchange rates is another important aim of credit control policy. Fluctuations in exchange rates can negatively impact a country’s foreign trade. Therefore, in nations that rely heavily on international trade, the central bank should use its credit control measures to reduce volatility in exchange rates.