Question

Which of the following is included in the qualitative method of controlling credit?

• A. Change in marginal requirement of loans
• B. Credit rationing
• C. Direct action
• D. All of these

Hint:

Qualitative credit controls are about *directing* the flow of loans, not just changing the total amount. Think of it as telling banks "lend more for farming, but less for luxury cars."

Answer 1

The Correct Option is D

Qualitative (or selective) credit control methods are used by the central bank to regulate the flow of credit to specific sectors of the economy, rather than controlling the overall volume of credit. The main tools include:

(A) Margin Requirements: The central bank can specify the margin (the down payment a borrower must make) for loans against securities. A higher margin discourages borrowing for that specific purpose (e.g., stock market speculation).
(B) Credit Rationing: The central bank can impose a ceiling on the amount of credit available to commercial banks or for specific industries.
(C) Direct Action and Moral Suasion: The central bank can issue directives (Direct Action) or use persuasion (Moral Suasion) to encourage or discourage banks from lending to certain sectors.
All the options are recognized qualitative methods.