The RBI uses the following instruments for quantitative control of credit:
(i) Cash Reserve Ratio
(ii) Bank Rate
(iii) Open Market Operations
(iv) Margin Requirements
Choose your answers from:
- A(i) and (ii)
- B(ii) and (iv)
- C(i), (ii) and (iii)
- D(i), (ii), (iii) and (iv)
Solution & Step-by-step Explanation
The Reserve Bank of India (RBI) utilizes two categories of instruments for credit control:
1. Quantitative (General) Controls: These regulate the total volume of credit in the banking system. Examples include the Cash Reserve Ratio (CRR), Bank Rate, Statutory Liquidity Ratio (SLR), and Open Market Operations (OMO).
2. Qualitative (Selective) Controls: These direct the flow of credit to specific sectors. Examples include fixing Margin Requirements, consumer credit regulation, and moral suasion.
Therefore, (i), (ii), and (iii) are quantitative controls, while (iv) is a qualitative control.
1. Quantitative (General) Controls: These regulate the total volume of credit in the banking system. Examples include the Cash Reserve Ratio (CRR), Bank Rate, Statutory Liquidity Ratio (SLR), and Open Market Operations (OMO).
2. Qualitative (Selective) Controls: These direct the flow of credit to specific sectors. Examples include fixing Margin Requirements, consumer credit regulation, and moral suasion.
Therefore, (i), (ii), and (iii) are quantitative controls, while (iv) is a qualitative control.