Question

The Reserve Bank of India aims to make the credit costly for the general public in order to reduce the availability of credit. What should be done?

Answer 1

The Reserve Bank of India should increase the repo rate. An increase in repo rate increases the costs of borrowing from the central bank. It forces the commercial banks to increase their lending rates, which discourages borrowers from taking loans. It makes the credit costly for the general public and reduces the availability of credit.