Question

Which of the following is the key difference between Direct Action and Moral Suasion?

Options

• Direct Action targets durable goods; Moral Suasion targets speculative lending

• Direct Action is informal and advisory; Moral Suasion is punitive and legal

• Direct Action is punitive and used against non-compliant banks; Moral Suasion is informal persuasion with no legal force

• Both are used equally against all commercial banks

Answer 1

Direct Action is punitive and used against non-compliant banks; Moral Suasion is informal persuasion with no legal force

Explanation:

Direct Action involves penalties such as refusing loans or charging penal interest rates, it is used only against banks that violate RBI policies. Moral Suasion, on the other hand, relies on advice, requests, and persuasion without any legal enforcement.