The central bank can increase availability of credit by?
Answers
Repo rate is the rate at which central bank lends money to other banks. If repo rate decreases, banks can decrease lending rates without losing their profit margins which increases the availability of credit supply.
Reverse repo rate is the rate at which other banks lend money to central bank. If reverse repo rate decreases, then banks will lend the same money in the market increasing the availability of credit.
The central banks can create credit, by decreasing the rate at which the commercial banks take loans from the central banks. In that way, the commercial banks would have more money in their hands, and hence even the people in the economy will be able to take more loans.
The central banks may even buy securities and bonds from the commercial banks to increase the amount of money suppy in the economy.
These are some of the measures taken by the central bank to increase the create credit and release more funds to the commercial banks.