Question

Which of the following best describes moral suasion?

Options

• Legal order forcing banks to lend to all sectors

• RBI’s informal advice and persuasion without any penalty

• Automatic change in CRR decided by banks

• Direct purchase of securities from the public

Answer 1

RBI’s informal advice and persuasion without any penalty

Explanation:

Moral suasion is a soft tool where RBI uses advice, directives, and publicity to influence banks, relying on its prestige rather than legal force.​