Question

Distinguish between:

1. Central Bank and Commercial Bank
2. Quantitative Credit Control Measures and Qualitative Credit Control Measures
3. Bank Rate and Open Market Operations
4. Cash Reserve Ratio and Statutory Liquidity Ratio

Answer 1

1.

Basis	Central Bank	Commercial Bank
Objective	The main objective of this bank is to regulate and control the functioning of the commercial banks.	The main objective of this bank is profit making.
Issue of notes	It has the exclusive right to issue currency notes and coins.	It cannot issue currency notes and coins.
Public dealing	It doesn’t deal with the public directly. It acts as a banker to other banks and to the government.	It deals with the general public directly.

2.

Basis	Quantitative Credit Control Measures	Qualitative Credit Control Measures
Affect	Instruments of these measures have an effect on the entire economy.	Instruments of these measures have an effect only on some individuals or parties and not on the entire economy.
Uses	These measures are used to affect the quantum of credit in the economy.	These measures are used to affect the use of credit.
Techniques	Some examples of quantitative techniques are Cash Reserve Ratio, Statutory Liquid Ratio, Bank Rate etc.	Some examples of qualitative techniques are Selective Credit Control, Moral Suasion, Rationing of Credit etc.

3.

Basis	Bank Rate	Open Market Operations
Meaning	It refers to the rate at which the Central bank grants loans to the commercial Banks.	It refers to the buying and selling of government securities.
Influence on the interest rate and the money supply	It affects the rate of interest directly and the money supply indirectly.	It affects the rate of interest indirectly and the money supply directly.

4.

Basis	Cash Reserve Ratio	Statutory Liquidity Ratio
Meaning	It is the minimum amount of funds that a commercial bank has to maintain with the Reserve Bank of India in the form of deposits.	It is the minimum percentage of assets, such as gold, cash or securities, which must be maintained by the commercial banks with the Central Bank.
Affect	It affects the bank's capacity to lend.	It affects the bank’s liquidity.