Central Bank - Functions and Credit Control

troduction Central Bank is an entity that controls the monetary system of a nation. The objectives of central bank are: to maintain external and internal value of domestic currency in relation to foreign currency, to ensure price stability in the economy, etc. The various Functions of Central Bank are:- Issues Currency Notes Banker to the Government Banker to the Banks Lender of the Last Resort Custodian of Foreign Exchange Reserve Clearing House Function Collection and Publication of Data Controller of Credit and Money Supply and Promotional and Developmental Functions Reserve Bank of India (RBI) is the central bank of India. RBI controls credit in the Indian economy through its monetary policy. Monetary Policy is a policy by which the monetary authority (central bank) of the country controls the supply of money and availability of credit and rate of interest in the economy to achieve economic stability. The two instruments of monetary policy are quantitative instruments also known as quantitative methods of credit control and qualitative instruments also known as qualitative methods of credit control. Quantitative Instruments of Credit Control includes Bank Rate, Open Market Operations, Cash Reserve Ratio and Statutory Liquidity Ratio. Qualitative Instruments of Credit Control includes Margin Requirements of Loan, Credit Rationing, Direct Action and Moral Suasion.

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