Maharashtra State BoardHSC Arts 12th Board Exam
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Write Explanatory Note: Qualitative Credit Control Methods of the Central Bank. - Economics

Write explanatory note: 

 Qualitative credit control methods of the Central Bank.

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Solution

The following are the various measures of qualitative credit control of the central bank:
i. Marginal Requirements- Margin requirement implies ascertaining the value of the loan that can be granted upon the mortgage of a certain security. The banks keep a margin, which is the difference between the market value of a security and its loan value. 
ii. Selective Credit Control (SCC’s)- An instrument of monetary policy that affects the flow of credit to particular sectors positively and negatively is known as selective credit control. The positive aspect is concerned with the increased flow of credit to the priority sectors. However, the negative aspect is concerned with measures to restrict credit to a particular sector.
iii. Moral Suasions- A persuasion technique followed by the central bank to pressurise the commercial banks to abide by the monetary policy is termed as moral suasion. This involves meetings, seminars, speeches and discussions, which explain the present economic scenario and thereby persuade the commercial banks to adapt the changes needed. In other words, this is an unofficial monetary policy that exercises the power of talk.

Concept: Method of Credit Control - Quantitative
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