QUANTITATIVE METHOD OF CREDIT CONTROL BY THE CENTRAL BANK?




Meaning: -Credit control measures refer to those measures adopted by RBI to increase or decrease the credit or money supply in the economy. If there is more money supply, it will lead to inflation, and therefore, RBI will adopt credit control measures to restrict money supply.

a.      QUANTITATIVE CREDIT (GENERAL) CONTROL

The general credit control is quantitative credit controls, which maintain proper quantity of credit or money supply in the market. These methods are formulated to affect proper liquidity in the market. Some of the important general credit controls are:

1.      Bank Rate: -It is the rate at which central bank (RBI) lends money to commercial banks by discounting bills of exchange. It acts as a guide line to the banks for fixing interest rates. If bank rate increases, interest rate wills goes up, and vice-versa. The bank rate is decided by the Central Bank. In April 2010, the bank rate was maintained at 6% p.a. Bank rate acts as a guideline to the banks for fixing interest rates. If the bank rates increases the interest rates increase, and vice-versa.

2.      Open Market Operation: -Open Market Operation implies deliberate direct sales and purchase of securities. The Central Bank sells the securities in the open market to decrease the money supply of the banks.OMO lead to expansion of credit when RBI buys securities. When RBI sells securities in the open market, the credit creating base of the commercial bank is reduced. When RBI purchases securities, the credit creation base of the banks is increased. Decreased of money supply raises the interest rate.


3.      Cash Reserve Ratio: -The CRR also affects money supply in the economy. It is the ratio or percentage of a bank’s (demand and term) deposits to be kept in reserve with RBI. Increase in CRR reduces the cash for lending, and a low CRR increases the cash for lending by banks. The CRR was 15% in 1991. Subsequently CRR was reduced. In April 2010, CRR was revised at 6%.


4.      Statutory regulation Ratio: -under SLR, the government has imposed an obligation on the banks to maintain a certain ratio  to its total deposits with the RBI in the form of liquid assets like cash, gold, and other securities. The SLR has been reduced form 38.5% in 1991 to present level of 25%.


5.      Development of Credit: -Various measures have been taken by RBI to deploy (arrange) credit to various sectors of the economy. For this a certain percentage of credit has been earmarked. For example, 40% of the total net bank credit has been earmarked (allocate) to the priority sector at low interest rates.

PDF FILE TO YOUR EMAIL IMMEDIATELY PURCHASE NOTES & PAPER SOLUTION. @ Rs. 50/- each (GST extra)

HINDI ENTIRE PAPER SOLUTION

MARATHI PAPER SOLUTION

SSC MATHS I PAPER SOLUTION

SSC MATHS II PAPER SOLUTION

SSC SCIENCE I PAPER SOLUTION

SSC SCIENCE II PAPER SOLUTION

SSC ENGLISH PAPER SOLUTION

SSC & HSC ENGLISH WRITING SKILL

HSC ACCOUNTS NOTES

HSC OCM NOTES

HSC ECONOMICS NOTES

HSC SECRETARIAL PRACTICE NOTES

2019 Board Paper Solution

HSC ENGLISH SET A 2019 21st February, 2019

HSC ENGLISH SET B 2019 21st February, 2019

HSC ENGLISH SET C 2019 21st February, 2019

HSC ENGLISH SET D 2019 21st February, 2019

SECRETARIAL PRACTICE (S.P) 2019 25th February, 2019

HSC XII PHYSICS 2019 25th February, 2019

CHEMISTRY XII HSC SOLUTION 27th, February, 2019

OCM PAPER SOLUTION 2019 27th, February, 2019

HSC MATHS PAPER SOLUTION COMMERCE, 2nd March, 2019

HSC MATHS PAPER SOLUTION SCIENCE 2nd, March, 2019

SSC ENGLISH STD 10 5TH MARCH, 2019.

HSC XII ACCOUNTS 2019 6th March, 2019

HSC XII BIOLOGY 2019 6TH March, 2019

HSC XII ECONOMICS 9Th March 2019

SSC Maths I March 2019 Solution 10th Standard11th, March, 2019

SSC MATHS II MARCH 2019 SOLUTION 10TH STD.13th March, 2019

SSC SCIENCE I MARCH 2019 SOLUTION 10TH STD. 15th March, 2019.


SSC SCIENCE II MARCH 2019 SOLUTION 10TH STD. 18th March, 2019.

SSC SOCIAL SCIENCE I MARCH 2019 SOLUTION20th March, 2019

SSC SOCIAL SCIENCE II MARCH 2019 SOLUTION, 22nd March, 2019

XII CBSE - BOARD - MARCH - 2019 ENGLISH - QP + SOLUTIONS, 2nd March, 2019

HSC Maharashtra Board Papers 2020

(Std 12th English Medium)

HSC ECONOMICS MARCH 2020

HSC OCM MARCH 2020

HSC ACCOUNTS MARCH 2020

HSC S.P. MARCH 2020

HSC ENGLISH MARCH 2020

HSC HINDI MARCH 2020

HSC MARATHI MARCH 2020

HSC MATHS MARCH 2020

SSC Maharashtra Board Papers 2020

(Std 10th English Medium)

English MARCH 2020

HindI MARCH 2020

Hindi (Composite) MARCH 2020

Marathi MARCH 2020

Mathematics (Paper 1) MARCH 2020

Mathematics (Paper 2) MARCH 2020

Sanskrit MARCH 2020

Sanskrit (Composite) MARCH 2020

Science (Paper 1) MARCH 2020

Science (Paper 2)

Geography Model Set 1 2020-2021

MUST REMEMBER THINGS on the day of Exam

Are you prepared? for English Grammar in Board Exam.

Paper Presentation In Board Exam

How to Score Good Marks in SSC Board Exams

Tips To Score More Than 90% Marks In 12th Board Exam

How to write English exams?

How to prepare for board exam when less time is left

How to memorise what you learn for board exam

No. 1 Simple Hack, you can try out, in preparing for Board Exam

How to Study for CBSE Class 10 Board Exams Subject Wise Tips?

JEE Main 2020 Registration Process – Exam Pattern & Important Dates


NEET UG 2020 Registration Process Exam Pattern & Important Dates

How can One Prepare for two Competitive Exams at the same time?

8 Proven Tips to Handle Anxiety before Exams!

BUY FROM PLAY STORE

DOWNLOAD OUR APP

HOW TO PURCHASE OUR NOTES?

S.P. Important Questions For Board Exam 2021

O.C.M. Important Questions for Board Exam. 2021

Economics Important Questions for Board Exam 2021

Chemistry Important Question Bank for board exam 2021

Physics – Section I- Important Question Bank for Maharashtra Board HSC Examination

Physics – Section II – Science- Important Question Bank for Maharashtra Board HSC 2021 Examination