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प्रश्न
Answer the following question.
Explain the "varying reserve requirements" method of credit control by the central bank.
उत्तर
1. Bank Rate: Bank rate refers to the rate at which the central bank provides loans to commercial banks. This instrument is a key at the hands of RBI to control the money supply. Changes in the bank rate change the cost of borrowings, thereby affect the money supply. This is explained by the following mechanism.
To summarise,
Bank rate ↑ ⇒ cost of borrowing for the commercial bank ↑ ⇒ lending rate for the public ↑ ⇒ Borrowing capacity ↓⇒ demand for loans and credit ↓⇒ money supply ↓
Bank rate ↓ ⇒ cost of borrowing for the commercial bank ↓ ⇒ lending rate for the public ↓ ⇒ Borrowing capacity ↑ ⇒ demand for loans and credit ↑ ⇒ money supply ↑
2. Cash reserve ratio (CRR)- It refers to the minimum proportion of the total deposits that the commercial banks have to maintain with the central bank in the form of reserves.
To summarise,
CRR ↑ ⇒ Deposits with the bank's ↓ ⇒ cash reserves of the bank ↓ ⇒ Lending capacity of the bank's ↓ ⇒ Money supply ↓
CRR ↓ ⇒ Deposits with the bank's ↑ ⇒ cash reserves of the bank ↑ ⇒ Lending capacity of the bank's ↑ ⇒ Money supply ↑
3. Statutory Liquidity Ratio (SLR): Statutory Liquidity Ration (SLR) is defined as the minimum percentage of assets to be maintained by the commercial banks with themselves in the form of either fixed or liquid assets. The flow of credit is reduced by increasing this liquidity ratio and vice-versa.
SLR ↑ ⇒ Minimum percentage of assets ↑ ⇒ Lending capacity of the bank's ↓ ⇒ Money supply ↓
SLR ↓ ⇒ Minimum percentage of assets ↓⇒ Lending capacity of the bank's ↑ ⇒ Money supply ↑
APPEARS IN
संबंधित प्रश्न
Explain how open market operations are helpful in controlling credit creation.
Explain how ‘bank rate' is helpful in controlling credit creation?
Explain with reasons, whether you agree or disagree with the following statement
Cash reserve ratio is a quantitative measure of credit control.
Central Bank has the sole power of issuing currency notes.
Write short answer for the following question :
Explain qualitative meansures of credit contorl adopted by the Central Bank.
State whether the following statements are True or False with reason:
Due to clearing house of the Central Bank cash money is saved.
State whether the following statement is TRUE or FALSE.
Credit rationing is quantitative credit control measure of Central bank.
Give reason or explain.
Clearing house system economises the use of cash.
Write short note on:
Issuing Directives
Write short note on:
Central Bank's measure of regulation of consumer credit
Answer the following question:
What are the various measures of quantitative credit control?
Answer the following question:
What are the various measures of qualitative credit control?
Answer the following question.
Discuss two qualitative methods of credit control.
Answer the following question.
Elaborate any two instruments of Credit Control, as exercised by the Reserve Bank of India.
Distinguish between 'Qualitative and Quantitative tools' of credit control as may be used by a Central Bank.
Differentiate between Cash Credit and Outright Loans.
Identify the correctly matched items from Column A to that of Column B:
| Column A | Column B | ||
| 1 | Issue of New Currency Notes | (a) | Government of India |
| 2 | Banker to the Government | (b) | State Bank of India |
| 3 | Controller of Credit | (c) | Reserve Bank of India |
| 4 | SLR | (d) | Development Bank |
