Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Which among the following is not a part of Qualitative measure of Monetary Policy of RBI ?

Options:

Margin Requirement

Moral Suasion

Reverse Repo Rate

Selective Credit Control

Correct Answer:

Reverse Repo Rate

Explanation:

Among the options provided, the one that is not a part of the Qualitative measures of Monetary Policy of RBI is: Reverse Repo Rate

Reverse Repo Rate is a part of the Quantitative measures of Monetary Policy. It is an interest rate at which the central bank borrows money from commercial banks. On the other hand, Qualitative measures involve influencing the allocation of credit by controlling its cost and determining the areas of investment. Margin Requirement, Moral Suasion, and Selective Credit Control are examples of Qualitative measures.

  • Margin Requirement: This refers to the minimum percentage of a security's value that must be paid upfront by the borrower when taking a loan. This directly impacts the amount of credit available and influences borrowing behavior.
  • Moral Suasion: This involves the RBI urging banks and financial institutions to follow certain guidelines or adopt specific lending practices without imposing any binding regulations. It relies on persuasion and cooperation.
  • Selective Credit Control (SCC): This involves setting specific guidelines and restrictions on loans for certain sectors or purposes. For example, the RBI might impose higher margin requirements or restrict lending to specific industries to control credit flow in those sectors