Which of the following is/are a qualitative tool of credit control adopted by the central bank of a country?
(A) Repurchase agreement.
(B) Moral suasion.
(C) Open market operations.
(D) Margin requirements.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (B) and (D) only
The Central Bank uses two types of credit control measures to regulate the flow of credit in the economy:
1. Quantitative (General) tools — affect the overall volume of credit:
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Bank Rate Policy
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Cash Reserve Ratio (CRR)
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Statutory Liquidity Ratio (SLR)
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Open Market Operations (OMO)
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Repurchase agreements (Repo/Reverse Repo)
(Hence, options A and C are quantitative tools.)
2. Qualitative (Selective) tools — influence the direction or allocation of credit:
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Moral Suasion → Persuading banks to follow the central bank’s guidelines.
-
Margin Requirements → Regulating how much loan banks can provide against securities.
(Hence, options B and D are qualitative tools.)