Question

Discuss how the central bank plays the role of 'controller of credit' in an economy?

Answer 1

This is the most crucial function played by any Central Bank in the modem times. Central Banks are supposed to regulate and control the volume, and direction of the credit by using:
(i) Quantitative Techniques: These are those techniques which influence the quantum of credit in the economy like open market operations, bank rate policy, repo and reverse repo rate poky, etc.
(ii) Qualitative Techniques or Selective Credit Control techniques are the ones which influence the direction of credit In the economy, like margin requirements and moral suasion.