Question

Explain in brief moral suasion as a tool of credit control.

Answer 1

Moral suasion is a credit management method that central banks employ to influence and persuade commercial banks to follow policy guidelines without formal directives or rules. The central bank makes informal requests, holds discussions, and issues public remarks to encourage banks to perform under national economic goals, such as controlling inflation or ensuring financial stability. It relies on the central bank's authority and legitimacy to encourage voluntary compliance.