Regulation of consumer credit is a quantitative credit control measure of the central bank.TrueFalse (2024)

FAQs

Regulation of consumer credit is a quantitative credit control measure of the central bank.TrueFalse? ›

Consumer credit refers to a personal debt taken by a consumer on the purchase of goods and services for the satisfaction of wants. It is a qualitative credit control measure of the central bank.

The Cash Reserve Ratio (CRR) is an effective instrument of credit control. Under the RBI Act of 1934 every commercial bank has to keep certain minimum cash reserves with RBI. The RBI is empowered to vary the CRR between 3% and 15%. A high CRR reduces the cash for lending and a low CRR increases the cash for lending.

Credit rationing is quantitative credit control measure of Central bank.

Consumer credit is credit issued to individuals that is not collateralized. Installment credit is provided in a lump sum and then repaid in regular installments over a set period of time. Revolving credit is an open-ended loan that may be reused indefinitely as you pay the balance.

Credit Control is a role of the Reserve Bank of India's central bank, which regulates credit, or the supply and the demand of money or liquidity in the economy. The central bank controls the credit extended by commercial banks to their customers through this function.

Detailed Solution. The correct answer is "Moral suasion". Moral suasion is defined as the attempt to coerce private economic activity through governmental exhortation in directions not defined by law. It is used in reference to central banks.

Margin requirements is not a quantitative credit control tool of RBI.

Credit rationing is quantitative credit control measure of Central bank.

Regulation of consumer credit.

Quantitative Instruments of Credit Control: These methods or instruments are used to regulate the total volume of credit in the economy. Some important quantitative instruments are open market operations, Cash Reserve Ratio (CRR), Bank rate, Statutory Liquidity Ratio (SLR), Repo rate, Reverse repo rate, etc.

What are the two main types of consumer credit? ›

Total consumer credit comprises two major types: revolving and nonrevolving. Revolving credit plans may be unsecured or secured by collateral and allow a consumer to borrow up to a prearranged limit and repay the debt in one or more installments.

The different instruments of credit control used by the Reserve Bank of India are Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), the Bank Rate Policy, Selective Credit Control (SCC), Open Market Operations (OMOs).

Moral Suasion:- The central bank makes the member bank agree through persuasion or pressure to follow its directives which is generally not ignored by the member banks. The banks are advised to restrict the flow of credit during inflation and be liberal in lending during deflation.

The most important function or responsibility of a central bank is to control credit. Quantitative methods are those which regulate the flow and direction of credit in certain selective sections of society. Qualitative methods include moral suasion, ultimatums and shutting down of banks as a last resort.

Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.

The quantitative measures include two rate and two ratio policies as well as open market operation whereas qualitative measures include margin requirement, rationing of credit and Moral suasion.