Question

Which of the following is not a Quantitative Method of Credit Control?

• A. Open Market Operation
• B. Margin Requirements
• C. Variable Reserve Ratio
• D. Bank Rate Policy

Answer 1

Answer: (B)

Margin Requirements

Margin requirement refers to the difference between the current value of the security offered for a loan (called collateral) and the value of the loan granted. For example- a person mortgages his house worth one crore rupees with the bank for a loan of 80 lakh rupees. The margin requirement, in this case, will be 20 lakh rupees. It is a qualitative method of credit control adopted by the central bank in order to stabilize the economy from inflation or deflation.