Advertisements
Advertisements
Question
Explain how 'margin requirements' are helpful in controlling credit creation?
Solution
Margin requirement is the difference between the current value of the security given for a loan and the value of loan granted. For example, mortgaging land for Rs 100 lakh with the bank for a loan of Rs 75 lakh. So, the margin requirement would be Rs 25 lakh. Therefore, to control deflation, the central bank reduces the margin money requirement which induces borrowers to avail more loans from commercial banks.
APPEARS IN
RELATED QUESTIONS
Explain how open market operations are helpful in controlling credit creation.
Explain the 'currency authority' function of a central bank.
Explain with reasons, whether you agree or disagree with the following statement
Cash reserve ratio is a quantitative measure of credit control.
Define or explain the following concept.
Bank Rate.
Write short answer for the following question :
Explain qualitative meansures of credit contorl adopted by the Central Bank.
Define or explain the following concepts.
Clearing house
Match the following Group ‘A’ with Group ‘B’ :
|
Group ‘A’ |
Group ‘B’ |
||
| (a) |
Economics | (1) | not steady |
| (b) |
Reward of capital | (2) | 1 April, 1935 |
| (c) |
Value of money | (3) | Social science |
| (d) |
Establishment of Central Bank | (4) | Income from commodity tax |
| (e) | Sales tax | (5) | Natural science |
| (6) | Interest |
||
| (7) | 1 April, 1939 | ||
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.
State whether the following statement is TRUE or FALSE.
Regulation of Consumer Credit is a quantitative credit control measure of Central Bank.
Give reason or explain.
Clearing house system economises the use of cash.
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 |
