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15th December 2015, 10:58 AM
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Join Date: May 2012
Re: Credit Control of Central Bank of India

Credit control is an important tool used by Reserve Bank of India, a major weapon of the monetary policy used to control the demand and supply of money (liquidity) in the economy.

Central Bank administers control over the credit that the commercial banks grant.

The purposely of the credit control are given below:
a. Stability of internal prices.
b. Stability of the foreign exchange rate.
c. Promoting high employment.

Methods of credit control

There are two methods that the RBI uses to control the money supply in the economy-

Qualitative method
Quantitative method

Method of credit control:

The contract bank controls the volume of credit through quantitative and qualitative methods.

1. Quantitative methods:

The quantitative methods relative to the increase or decrease in the volume of credit. These methods are as follows:

Bank rate policy
Open market operation

2. Qualitative methods:

These methods relates to establishment of rules under which credit creation can be allowed. The qualitative methods are as follows.

Credit rationing
Direct action
Moral persuation
Margin requirement


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