Question

State two ways by which a deflationary situation can be controlled by qualitative methods of credit control.

Answer 1

The qualitative or the selective methods are directed towards the diversion of credit into particular uses or channels in the economy. Their objective is mainly to control and regulate the flow of credit into particular industries or businesses.

The following are the important methods of credit control under selective method:

1. Rationing of Credit.

2. Direct Action.

3. Moral Persuasion.

4. Method of Publicity.

5. Regulation of Consumer’s Credit.

6. Regulating the Marginal Requirements on Security Loans.