Q. 19

How RBI controls

Answer :

The central bank of a country has complete control over the money supply and the credit in the best interest of the economy. The Central Bank of India is the Reserve Bank of India. It controls the money supply and credit circulation in the economy. It can also control the inflationary and deflationary situations whenever they arise. The central bank uses two different types of instruments to perform this function which is mentioned below:

a. Qualitative instrument: Qualitative instruments aim at influencing the usage of credit and its direction. These are the instruments such as margin requirement, moral suasion, rationing of credit, differentiated rate of interest, consumer credit and direct action.

b. Quantitative instruments: Quantitative Instruments focus on controlling the cost of credit and the availability of credit. These are the instruments such as bank rate, open market operation, cash reserve ratio and statutory liquidity ratio.

Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
view all courses

Explain how 'ReveEconomics - Board Papers

Explain the role Economics - Board Papers

Explain howEconomics - Board Papers

Explain theEconomics - Board Papers