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 in the economy.
Quantitative
1. Bank rate
2. Open market operation
3. Variations in the require
4.Repo rate
5.Liquidity adjustment facility
Qualitative
1. Rationing of credit
2. Marginrequirement
3. Variable interest rate
4.Regulation of consumer credit
5. Licensing
Quantitative Instruments:
Bank Rate:
The bank rate, also known as the Discount Rate, is the oldest instrument of monetary policy. Bank rate is the rate at which the RBI discounts - or, more accurately.
Open market Operations:
Open market operations are the means of implementing monetary policy by which a central bank controls its national money supply by buying and selling government securities or other financial instrument.
Variations in the Reserve Requirement
The reserve bank also uses the method of variable reserve requirements to control credit in India.
By changing the ratio, The reserve bank seeks to influence the credit creation power of the commercial banks.
Repo Rate and Reserve Repo Rate
Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which banks borrow rupees from RBI,
Liquidity Adjustments Facility:
It is a cool, used in monetary policy that allows banks to borrow money through repurchase agreements.
This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the fanancial markets.
Policy Rates
Policy Repo Rate: 6.25%
Standing Deposit Facility Rate: 6.00%
Marginal Standing Facility Rate: 6.50%
Bank Rate: 6.50%
Fixed Reverse Repo Rate: 3.35%
Reserve Ratio
CRR 4.50%
SLR 18.00%
Lending / Deposit Rates
Base Rate-8.60% - 9.40%
MCLR(overnight) -7.30% - 8.40%
Savings Deposit Rate -2.70% - 3.00%
Term Deposit Rate > 1 Year-6.00% -7.25%