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Question
Write short notes on regulation of margin requirements.
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Solution
Margin
requirement refers to the difference between the current value of the security
offered for loan (called collateral) and the value of loan granted. It is
a qualitative method of credit control adopted by the central bank in order to
stabilize the economy from inflation or deflation. During inflation, the margin requirement is increased to decrease the demand for loan and during deflation, the margin requirement is decreased to increase the demand for loan in the economy.
Margin
requirement refers to the difference between the current value of the security
offered for loan (called collateral) and the value of loan granted. It is
a qualitative method of credit control adopted by the central bank in order to
stabilize the economy from inflation or deflation. During inflation, the margin requirement is increased to decrease the demand for loan and during deflation, the margin requirement is decreased to increase the demand for loan in the economy.
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