Question

Which of the following are the qualitative measures of RBI?

Options

• Marginal Requirements

• Selective Credit Control

• Moral Suasions

• All of the above

Answer 1

All of the above

Explanation:

Qualitative Measures

The factors that influence credit quality are:

1. Marginal Requirements
   The ability of the Commercial Banks to grant loans is based on the value of the collateral being mortgaged. As a result, banks maintain a margin, which is defined as the difference between the market value of a security and the loan amount. A commercial bank, for example, may grant a loan of Rs.80,000 against the collateral of Rs.1,000,000. As a result, the margin is calculated as 100,000 minus 80,000 = 20,000. When the central bank decides to restrict the flow of money, the loan margin requirement is increased, and vice versa when the central bank decides to expand credit.
2. Selective Credit Control (SCCs)
   Selective credit control is a monetary policy tool that influences the flow of credit to specific sectors in a favorable or negative way. The increasing flow of credit to key industries is one of the good aspects. However, there is a negative component to consider. With the procedures to limit loans to a specific industry,
3. Moral Suasions
   Moral suasion is a persuasion strategy used by the central bank to compel commercial banks to adopt the monetary policy. Meetings, seminars, lectures, and discussions are held in order to explain the current economic situation and persuade commercial banks to make the necessary reforms. To put it another way, this is an unofficial monetary policy based on the power of speech.