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Question
Give an example of margin requirements.
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Solution
Example of margin requirements:
Suppose the central bank fixes a margin of 30%, then the bank is allowed to give a loan only up to 70% of the value of the security.
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The difference between the value of security and the amount of loan sanctioned against these securities is known as:
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______ is a quantitative method of credit control.
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Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
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Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank :
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Assertion (A): Bank rate is a quantitative instrument of monetary policy.
Reason (R): During inflation, RBI reduces the bank rate.
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