Answer the following questions.
What are the various measures of Quantitative Credit Control?
What are the various measures of Quantitative Credit Control?
Quantitative Methods of credit control refers to the monetary policy of central bank which includes those instruments that focus on the overall supply
of the money. The various measures under quantitative credit control are:
A. Two Policy
Rates:
Bank rate is
the rate charged on the loans offered by the Central bank to the commercial
banks without any collateral. It is increased at the time of inflation to
reduce the money supply in the economy and vice versa.
Repo
rate is the rate charged on the secured loans offered by the Central bank
to the commercial banks that includes collateral. It is increased at the time
of inflation to reduce the money supply
in the economy and vice versa. \
B. Two Policy
Ratio:
Statutory
Liquidity Ratio (SLR) refers to liquid assets that the commercial banks must
hold on daily basis as a percentage of their total deposits. SLR is determined
by the central bank and is a legal requirement to be fulfilled by the
commercial banks. It is increased at the time of inflation to reduce
the money supply in the economy and vice versa.
Cash Reserves
Ratio (CRR) refers to the proportion of total deposits of the commercial
banks which they must have keep as cash reserves with the central bank. The
ratio is fixed by the central bank and is varied from time to time to control
the supply of money in the economy depending upon the prevailing situation of
inflation or deflation.
C. Open Market
Operations:
Open market operation
(OMO) is a monetary policy by the central bank in which the bank deals in the
sale and purchase of securities in the open market to control the supply of
money.
Quantitative Methods of credit control refers to the monetary policy of central bank which includes those instruments that focus on the overall supply of the money. The various measures under quantitative credit control are:
A. Two Policy Rates:
Bank rate is the rate charged on the loans offered by the Central bank to the commercial banks without any collateral. It is increased at the time of inflation to reduce the money supply in the economy and vice versa.
Repo rate is the rate charged on the secured loans offered by the Central bank to the commercial banks that includes collateral. It is increased at the time of inflation to reduce the money supply in the economy and vice versa. \
B. Two Policy Ratio:
Statutory Liquidity Ratio (SLR) refers to liquid assets that the commercial banks must hold on daily basis as a percentage of their total deposits. SLR is determined by the central bank and is a legal requirement to be fulfilled by the commercial banks. It is increased at the time of inflation to reduce the money supply in the economy and vice versa.
Cash Reserves
Ratio (CRR) refers to the proportion of total deposits of the commercial
banks which they must have keep as cash reserves with the central bank. The
ratio is fixed by the central bank and is varied from time to time to control
the supply of money in the economy depending upon the prevailing situation of
inflation or deflation.
C. Open Market Operations:
Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities in the open market to control the supply of money.
