Question

Answer the following question.
Discuss two qualitative methods of credit control.

Answer 1

(i) Credit Rationing: Rationing of credit is a method by which the Reserve Bank seeks to limit the maximum amount of loans and advances, and also in certain cases fix a ceiling for specific categories of loans and advances.

(ii) Moral Suasion: Moral suasion and credit monitoring arrangement are other methods of credit control. The policy of moral suasion will succeed only if the Reserve Bank is strong enough to influence the commercial banks.