Advertisements
Advertisements
Question
Explain the following function of the central bank of a country.
Fixation of margin requirement on secured loans.
Answer in Brief
Advertisements
Solution
- A country's central bank decides the margin requirement for secured loans as part of its credit control system. This is the percentage of the collateral's value that a borrower must provide as security for a loan.
- The central bank can limit the quantity of credit available to borrowers by adjusting the margin requirement.
- A greater margin requirement requires borrowers to produce more collateral, restricting the amount they can borrow.
- This enables the central bank to control the flow of credit in the economy, affecting inflation, consumption, and investment.
shaalaa.com
Monetary Policy of the Central Bank
Is there an error in this question or solution?
Chapter 9: Central Banks - QUESTIONS [Page 215]
APPEARS IN
RELATED QUESTIONS
Define qualitative credit control policy of the RBI.
The central bank controls credit _____ .
______ is a quantitative method of credit control.
Bank rate is the rate at which:
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
Central bank is the lender of the last resort. Explain.
Identify the following Credit Control measure undertaken by the Central Bank during inflation.
The Central Bank sells government approved securities to the public.
Define moral persuasion.
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
