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Questions
Give any two reasons as to why a country needs a central bank.
Mention two reasons for setting up the central bank (or the Reserve Bank of India).
With reference to the central bank of a country.
State two reasons for the need of a Central Bank in a country.
Solution
Two reasons for setting up the Central Bank are:
- The Central Bank is set up to control the supply of money and credit in the country.
- Every central bank is set up to control the entire banking system of a country.
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RELATED QUESTIONS
Which of the following is a selective/qualitative method of credit control.
The rate of which commercial banks borrow from the Central Bank is the:
Explain how credit rationing helps to control credit in an economy.
During deflation, the Central Bank usually ______.
The central bank controls credit _____ .
Bank rate is the rate at which:
The process of buying and selling of securities by the central bank of a country is known as ______.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
Observe the relationship of the first pair of words and complete the second pair.
Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank :
Differentiate between quantitative and qualitative methods of credit control.
Briefly explain the following credit control method adopted by the Central Bank.
Publicity
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
Explain the following function of the central bank of a country.
Fixation of margin requirement on secured loans.
What are quantitative methods of credit control?
Define moral persuasion.
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
