central bank control credit credition of banks by a crr b slr c both a and b d none of these
Answers
Answer:
The bank rate is the rate at which the Central Bank of a country is prepared to re-discount the first class securities.
ADVERTISEMENTS:
It means the bank is prepared to advance loans on approved securities to its member banks.
As the Central Bank is only the lender of the last resort the bank rate is normally higher than the market rate.
For example:
ADVERTISEMENTS:
If the Central Bank wants to control credit, it will raise the bank rate. As a result, the market rate and other lending rates in the money-market will go up. Borrowing will be discouraged. The raising of bank rate will lead to contraction of credit.
Similarly, a fall in bank rate mil lowers the lending rates in the money market which in turn will stimulate commercial and industrial activity, for which more credit will be required from the banks. Thus, there will be expansion of the volume of bank Credit.
Answer:
A).
CRR
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