Class 12 Finance Chapter 3 Credit Control Techniques of the Reserve Bank of India

Class 12 Finance Chapter 3 Credit Control Techniques of the Reserve Bank of India Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Finance Chapter 3 Credit Control Techniques of the Reserve Bank of India Solutions in English and select need one. AHSEC Class 12 Finance Solutions Download PDF. HS 2nd Year Finance Textual Solutions.

Class 12 Finance Chapter 3 Credit Control Techniques of the Reserve Bank of India

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Banking Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Finance Textual Solutions English Medium for All Chapters, You can practice these here.

Credit Control Techniques of the Reserve Bank of India

Chapter: 3

Unit – 1: FINANCIAL INSTITUTIONS

A. Very Short Questions Answer.

1.  What is the meaning of credit control?

Ans: Credit control is the process by which the RBI regulates the supply and cost of credit in the economy.

2. What is the meaning of credit control techniques?

Ans: Credit control techniques are the methods used by the RBI to regulate the volume and direction of credit in the economy.

B. Short Answer Questions:

1. Write two objectives of credit control.

Ans: (i) To maintain price stability in the economy.

(ii) To regulate the supply of money and credit.

2. What are the two types of credit control techniques?

Ans: (i) Quantitative (General) Credit Control Techniques.

(ii) Qualitative (Selective) Credit Control Techniques.

3. What is the Bank Rate?

Ans: Bank Rate is the rate at which the RBI lends money to commercial banks without any collateral for long-term purposes.

4. What is Open Market Operation?

Ans: Open Market Operation is the buying and selling of government securities by the RBI to regulate the money supply in the economy.

5. What is Cash Reserve Ratio (CRR)?

Ans: Cash Reserve Ratio (CRR) is the minimum percentage of a bank’s total deposits that must be kept as cash reserves with the RBI.

6. What is Statutory Liquidity Ratio (SLR)?

Ans: Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that banks must maintain in the form of liquid assets such as cash, gold, and approved securities.

7. What is the Issue of Directives?

Ans: Issue of Directives is a qualitative credit control measure through which the RBI gives instructions to commercial banks regarding lending policies.

8. What is Regulation of Consumer Credit?

Ans: Regulation of Consumer Credit is a selective credit control measure through which the RBI regulates credit granted for the purchase of consumer durable goods.

9. What is Credit Rationing?

Ans: Credit Rationing is a selective credit control method in which the RBI limits the amount of credit that commercial banks can provide.

10. What is Margin Requirement?

Ans: Margin Requirement is the difference between the market value of a security and the amount of loan granted against it.

11. What is Moral Suasion?

Ans: Moral Suasion is a qualitative credit control technique in which the RBI persuades commercial banks to follow its credit policies without using legal force.

C. Long Answer Questions (Type-I): 

1. State the various objectives of credit control.

Ans: The main objectives of credit control are:

(i) To maintain price stability by controlling inflation and deflation.

(ii) To regulate the supply of money and credit in the economy.

(iii) To ensure adequate credit for productive sectors.

(iv) To promote economic growth and financial stability.

(v) To prevent excessive speculation and misuse of credit.

(vi) To maintain stability in the banking and financial system.

2. Briefly state the qualitative credit control techniques applied by the RBI.

Ans: The RBI uses the following qualitative (selective) credit control techniques:

(i) Margin Requirements: The RBI changes the margin requirement to regulate loans against securities.

(ii) Regulation of Consumer Credit: The RBI controls credit granted for the purchase of consumer durable goods.

(iii) Credit Rationing: The RBI limits the amount of credit that banks can provide.

(iv) Issue of Directives: The RBI issues instructions to banks regarding their lending policies.

(v) Moral Suasion: The RBI persuades banks to follow its policies without using legal force.

(vi) Direct Action: The RBI takes action against banks that fail to follow its instructions.

D. Long Answer Questions (Type-II): 

1. Discuss the quantitative credit control techniques applied by the RBI.

Ans: The RBI uses the following quantitative (general) credit control techniques:

(i) Bank Rate Policy: The RBI changes the bank rate to influence the cost of borrowing by commercial banks.

(ii) Open Market Operations (OMO): The RBI buys and sells government securities to increase or decrease the money supply.

(iii) Cash Reserve Ratio (CRR): The RBI changes the CRR to control the lending capacity of commercial banks.

(iv) Statutory Liquidity Ratio (SLR): The RBI changes the SLR to regulate the amount of funds available for lending.

(v) Repo Rate: The RBI changes the repo rate to regulate short-term borrowing by banks.

(vi) Reverse Repo Rate: The RBI changes the reverse repo rate to absorb excess liquidity from the banking system.

2. Discuss the credit control techniques applied by the RBI.

Ans: The RBI controls credit through two types of techniques—Quantitative and Qualitative.

(A) Quantitative Credit Control Techniques:

(i) Bank Rate Policy.

(ii) Open Market Operations (OMO).

(iii) Cash Reserve Ratio (CRR).

(iv) Statutory Liquidity Ratio (SLR).

(v) Repo Rate.

(vi) Reverse Repo Rate.

(B) Qualitative Credit Control Techniques:

(i) Margin Requirements.

(ii) Regulation of Consumer Credit.

(iii) Credit Rationing.

(iv) Issue of Directives.

(v) Moral Suasion.

(vi) Direct Action.