RBI using various tools to control credit in market one of them is ldquo rationing of credit ldquo w...........

Economic Affairs Types of Banks and Banking

RBI using various tools to control credit in market one of them is “rationing of credit “ which means:

In which money or loans are very difficult to obtain in a given country. If you do have the opportunity to secure a loan, then interest rates are usually extremely high.

Under the banking regulation Act, the central bank has the authority to take strict action against any of the commercial banks that refuses to obey the directions given by Reserve Bank of India. There can be a restriction on advancing of loans imposed by Reserve Bank of India on such banks.

Under this method there is a maximum limit to loans and advances that can be made, which the commercial banks cannot exceed. RBIfixes ceiling for specific categories. Such rationing is used for situations when credit flow is to be checked, particularly for speculative activities

None of these

छोटे Courses बड़े Results

Master Types of Banks and Banking

Prepare through Micro-courses

Try Now

Explanation:

By Quality we mean the uses to which bank credit is directed.
For example- the bank may feel that spectators or the big capitalists are getting a disproportionately large share in the total credit, causing various disturbances and inequality in the economy, while the small-scale industries, consumer goods industries and agriculture are starved of credit.
Correcting this type of discrepancy is a matter of qualitative credit control.
Qualitative method controls the manner of channelizing of cash and credit in the economy. It is a 'selective method' of control as it restricts credit for certain section where as expands for the other known as the 'priority sector' depending on the situation.
Rationing of credit[edit]
Under this method there is a maximum limit to loans and advances that can be made, which the commercial banks cannot exceed. RBI fixes ceiling for specific categories. Such rationing is used for situations when credit flow is to be checked, particularly for speculative activities. Minimum of “capital: total assets" (ratio between capital and total asset) can also be prescribed by Reserve Bank of India