What is the credit rationing method of credit control ?
Answers
Answer:
Rationing of credit is a method by which the Central Bank seeks to limit the maximum amount of loans and advances and, also in certain cases fix ceiling for specific categories of loans and advances.
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The credit rationing methods of credit control are :-
♥ Quantitative or traditional methods of credit control include banks rate policy, open market operations and variable reserve ratio.
(i) Bank Rate - It is the rate payable by commercial banks on the loans from or rediscounts of the Central Bank .
(ii) Open Market Operations - It refers to the sale and purchase of securities by the Central bank to the commercial banks .
(iii) Variable Reserve ratio - It refers to the proportion of bank deposits that the commercial banks are required to keep in the form of cash to ensure liquidity for the credit created by them.
♥ The qualitative or selective methods of credit control are adopted by the Central Bank in its pursuit of economic stabilisation and as part of credit management .
(i) Margin Requirements - They are designed to influence the flow of credit against specific commodities .
(ii) Credit Rationing - It is a method by which the Central Bank seeks to limit the maximum amount of loans and advances .
(iii) Regulation of Consumer Credit - It is designed to check the flow of credit for consumer durable goods .
(iv) Moral Suasion: Moral suasion and credit monitoring arrangement are other methods of credit control.
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Shreya ❤