Credit Control: Quantitative Measures v/s Qualitative Measures RBI
Credit control is most important function of Reserve Bank of India. Credit control in the economy is required for the smooth functioning of the economy. By using credit control methods RBI tries to maintain monetary stability. There are two types of methods:
- Quantitative control to regulates the volume of total credit.
- Qualitative Control to regulates the flow of credit
Here is a brief description of the quantitative and qualitative measures of credit control used by RBI.
Quantitative Measures
The quantitative measures of credit control are as follows:
Bank Rate Policy
The bank rate is the Official interest rate at which RBI rediscounts the approved bills held by commercial banks. For controlling the credit, inflation and money supply, RBI will increase the Bank Rate.
Open Market Operations
Open Market Operations refer to direct sales and purchase of securities and bills in the open market by Reserve bank of India. The aim is to control volume of credit.
Cash Reserve Ratio
Cash reserve ratio refers to that portion of total deposits in commercial Bank which it has to keep with RBI as cash reserves.
Statutory Liquidity Ratio
SLR refers to that portion of deposits with the banks which it has to keep with itself as liquid assets(Gold, approved govt. securities etc.) If RBI wishes to control credit and discourage credit it would increase CRR & SLR.
Qualitative Measures
Qualitative measures are used by the RBI for selective purposes. Some of them are
Margin requirements
This refers to difference between the securities offered and amount borrowed by the banks.
Consumer Credit Regulation
This refers to issuing rules regarding down payments and maximum maturities of instalment credit for purchase of goods.
RBI Guidelines
RBI issues oral, written statements, appeals, guidelines, warnings etc. to the banks.
Rationing of credit
The RBI controls the Credit granted / allocated by commercial banks.
Moral Suasion
Psychological means and informal means of selective credit control.
Direct Action
This step is taken by the RBI against banks that don’t fulfil conditions and requirements. RBI may refuse to rediscount their papers or may give excess credits or charge a penal rate of interest over and above the Bank rate, for credit demanded beyond a limit.
Miho
May 14, 2012 at 10:04 pm/ Hi Saurabh,Unfortunately Indians can’t fund their Paypal account via bank acntucos. The only way an Indian can fund their Paypal account is through a credit card or if someone else sends money from their paypal account to yours.But even after the March 1st thing, you can still withdraw the Paypal amount to your Bank account but not vice versa. Therefore you cannot use your ICICI bank account to send money to your Paypal account.
saveitharani
February 26, 2014 at 6:29 amdifference between direct acion and moral suasion
Noordeensha
March 25, 2014 at 9:29 amThank you it is usefull for me
manan sanghvi
March 4, 2015 at 1:47 amThanks bro for the information it was really helpful :D
rahul
March 26, 2015 at 2:23 pmI have one question:- in american economy there is consumer instalment debt but now a days its know as non revolving consumer credit outstanding amount. So do we have any thing like that in indian economy
Consumer instalment debt means it includes all the figures of consumer loans such as automobile loan, student loan,home loan etc. Pls somebody help me put n also let me know from where can I get this figures
SUJA
April 20, 2018 at 3:23 pmThank u so much, This information more helpful to me
M.VADIVEL
May 5, 2018 at 9:44 amThank u so much, This information more helpful to me
dipu
May 15, 2018 at 9:21 pmthank u soo much it is very easy language and its help me..
vishal
December 11, 2018 at 8:02 pmIn margin requirement it should have been borrowed from the bank.
well!it was useful