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Question
Which of the following is not a quantitative method of credit control?
Options
Open market operation
Margin requirements
Variable reserve ratio
Bank rate policy
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Solution
Margin requirements
Explanation:
Margin requirements are a qualitative approach to credit control. They refer to the difference between the value of the collateral (security) and the loan amount approved, which is used to control the flow of credit to specified sectors or objectives.
RELATED QUESTIONS
Which of the following is a selective/qualitative method of credit control.
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| Column A | Column B | ||
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| (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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Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
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Define the following term:
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Margin Requirements.
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