Advertisements
Advertisements
Question
Identify the following Credit Control measures undertaken by the Central Bank during inflation.
The Central Bank increases the rate at which it lends to the Commercial Bank.
Advertisements
Solution
Increasing the lending rate to commercial banks is referred to as increasing the Bank Rate. By increasing the bank rate, the cost of borrowing for commercial banks rises, leading to higher lending costs for businesses and consumers. This reduces the effects of inflation.
APPEARS IN
RELATED QUESTIONS
The difference between the value of security and the amount of loan sanctioned against these securities is known as:
Define qualitative credit control policy of the RBI.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Bank rate is a quantitative instrument of monetary policy.
Reason (R): During inflation, RBI reduces the bank rate.
Give any two reasons as to why a country needs a central bank.
Define the term Statutory Liquidity Ratio.
State the impact of an increase in Cash Reserve Ratio on loanable funds.
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
What is this policy called that controls the credit supply in an economy?
Define moral persuasion.
Describe two quantitative credit control measures of the Central Bank.
