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

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsMoney and Banking3 Marks
Question
How does a central bank perform the function of controller of credit?
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Answer

The central bank controls credit through the various methods categorised as the quantitative and the qualitative methods. Quantitative methods include bank rate policy, open market operations, varying reserve requirements. These methods affect total quantity of credit in the country. Qualitative methods include margin requirements, moral suasion, etc. These methods affect allocation of credit among the alternative uses.

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