What are the various measures of quantitative credit control?
Answers
Quantitative or traditional methods of credit control include banks rate policy, open market operations and variablereserve ratio. Qualitative or selective methods of credit control include regulation of margin requirement, credit rationing, regulation of consumer credit and direct action.
The various measures of quantitative credit control are:
1. Bank Rate: Bank Rate refers to that rate at which commercial banks takes loans from the Central Bank. This tool is being used in order to have a control over the credit by increasing or decreasing the rate. Increase in the bank rate leads to increase in market rate which ultimately reduces the flow of loans in the market by the commercial banks and vice versa.
2. Open Market Operations: It refers to the buy and sale of the securities by the Central Bank. In the situation of inflation in the market which means increase in demand as compared to the supply, the Central Bank will withdraw the money from the market by selling the securities and vice versa.
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