Question

Explain with reasons whether you 'agree' or 'disagree' with the following statement:
Bank rate is a quantitative measure of credit control.

Answer 1

Agree.

Bank rates are the rates charged on the loans offered by the Central bank to the commercial banks without any collateral. The bank rate does not allow any facility of repurchase of securities. It relates to the borrowing by the commercial banks to cope with their immediate cash crunch. It is a form of quantitative measure of credit control used by the central bank to deal with the situation of inflation or deflation.