What are the Instruments of Credit Control?

By Priya Gupta|Updated : June 29th, 2022

Credit control methods of RBI (Reserve Bank of India) act like weapons to control the liquidity in the economy or we can say to control the current demand and supply. Some major instruments of credit control used by RBI are as follows: Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), Bank Rate, Selective Credit Control (SCC), and Open Market Operations (OMOs).

What are Credit Control Instruments used by RBI?

The instruments of credit control are used by the Central bank to regulate the credit granted to the customers by the commercial banks. These instruments can be divided into two broad categories which are Qualitative and Quantitative instruments. Let us learn more about them in detail.

  • Qualitative Instruments of Credit Control: These are used to regulate the flow of credit in a specific direction as decided by the RBI. They influence the types of credit given by the commercial banks rather than the total volume. Some examples of qualitative instruments of Credit control methods of RBI are Margin requirements, Rationing of credit, Consumer credit regulation, Moral suasion, etc.
  • Quantitative Instruments of Credit Control: These methods or instruments are used to regulate the total volume of credit in the economy. Some important quantitative instruments are open market operations, Cash Reserve Ratio (CRR), Bank rate, Statutory Liquidity Ratio (SLR), Repo rate, Reverse repo rate, etc.

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FAQs on What are the Instruments of Credit Control?

  • The quantitative instruments of credit control are used by the Central Bank to regulate the total volume or the size of credit in our economy, unlike qualitative instruments which regulated the direction or flow of credit. Some common quantitative instruments of credit control are Bank rate, Repo rate, CRR, SLR, etc.

  • Yes, the bank rate is one of the important quantitative instruments of credit control methods of RBI. It is a rate at which the Central bank purchases instruments like bills and commercial papers.

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