Question

What is selective credit control?

Answer 1

It refers to discriminatory policy of the central bank relating to select sectors of the economy. Flow of credit to certain sectors (priority sectors) may be encouraged with a view to stimulate production in these sectors. This is a positive application of selective credit controls. On the other hand, the central bank may decide to restrict the availability of credit to certain (non-priority) sectors. Generally, during periods of inflation, availability of credit for speculative activities (like storage of food grains) is discouraged. This is a negative application of the selective credit controls.