Which tool is used by RBI for selective credit control?

Which tool is used by RBI for selective credit control?

Through DIR, RBI makes credit flow to certain priority or weaker sectors by charging concessional rates of interest. RBI issues supplementary instructions regarding granting of additional credit against sensitive commodities, issue of guarantees, making advances etc.

What are the credit control methods of RBI?

Quantitative or traditional methods of credit control include banks rate policy, open market operations and variable reserve ratio. Qualitative or selective methods of credit control include regulation of margin requirement, credit rationing, regulation of consumer credit and direct action.

What are the credit control weapons adopted by RBI?

In under developed country like India there is no such close relationship between the bank rate and the other rates.

  • Weapon # 2. Open Market Operations:
  • Weapon # 3. Varying Cash Reserve Ratio:
  • Weapon # 4. Cash Rationing:
  • Weapon # 5. Direct Action:
  • Weapon # 6. Moral Suasion:
  • Weapon # 7. Publicity:

Who control the credit control?

Banks, financial institutions, retailers, and manufacturers use this strategy to ensure profitable lending and lend to only those customers who have a high probability of repaying their debt. The risk committee of the company monitors credit control to minimise losses due to poor loans.

Which is the tool of qualitative credit control?

Margin Requirements, Moral Suasion, Selective Credit Control, Direct Action, Rationing of Credit are the qualitative tools used to control the credit.

What is credit control Example?

Credit control is a company department that determines how much credit to offer customers. It is also responsible for chasing up late payers. For example, if you allow a customer to pay thirty days after the invoice date, there is a trade credit arrangement. Most arrangements are for thirty, sixty, or ninety days.

What is credit control by RBI?

Credit control is an important tool of the monetary policy used by Reserve Bank of India (central bank) to control the demand and supply of money and flow of credit in an economy. RBI keeps control over the credit created by commercial banks.

What is the most important function of RBI?

INTRODUCTION • The most important function of the central bank ( RBI ) is to control credit created by commercial banks. Money & credit represent a powerful force to good or evil in the economy.

What is selective controls by RBI?

The RBI has used this method for regulating the flow of credit of specific branches of economic activity and thus check the misuse of borrowing facilities. Commercial banks have been prohibited from extending credit for speculative hoarding of such commodities by traders. This is the main thrust of selective controls.

What are the measures taken by the RBI to control inflation?

The Reserve Bank has adopted a number of credit control measures to check the inflationary tendencies in the country: The bank rate is the rate at which the Reserve Bank advances to the member banks against approved securities or rediscounts the eligible bills of exchange and other papers.