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Question
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
Answer in Brief
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Solution
- 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.
- This is exercised through letters, discussions and directives to the banks.
- The member banks generally do not ignore the advice of the central bank.
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Monetary Policy of the Central Bank
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Chapter 9: Central Banks - QUESTIONS [Page 215]
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