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Money and Banking — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsMoney and Banking4 Marks
Question
Explain how ‘margin requirements’ are helpful in controlling credit creation?
✓

Answer

Margin requirements refer to discount fixed by the central bank on the security mortgages by the borrower. Raising marginal requirement reduces the maximum amount a borrower can borrow from commercial banks. In this way it helps in controlling credit creation.

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