The measurements of money supply can be classified into Broad money supply and Narrow money supply. But to understand this first we have to understand the meaning of liquidity of money Liquidity of Money Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most …
Broad money supply and Narrow money supply concepts Read More »
There are two different concepts. First is stock of money and second is supply of money. And both are very much different. Lets first understand the stock of money. Stock of money includes the amount of money held by a) consumers of money i.e. people of the country and b) Suppliers/Producers of money i.e. Government …
Money was not always the same as we see it today. It has taken many years of innovations to reach the present form of money. Here is a brief overview of the main stages of money development:
The barter system is a system of exchange where goods and services are traded directly without the use of money. It is an ancient form of trade that was used before money was invented. However, the barter system has several limitations that make it inefficient and impractical in the modern economy. Some of these limitations …
Rationing of credit as a qualitative instrument of credit control is a method used by the central bank to limit the amount and purpose of credit granted by commercial banks and other financial institutions to certain sectors or industries, according to the economic priorities and objectives of the central bank. Rationing of credit can be …
Moral suasion as a qualitative instrument of credit control is a method used by the central bank to influence the lending behaviour of commercial banks and other financial institutions by using its moral authority and persuasive power, rather than legal or regulatory means. Moral suasion involves the central bank issuing advice, suggestions, requests and appeals …
Margin requirements refer to the difference between the current value of the security offered for loan (called collateral) and the value of loan granted. For example, mortgaging land for Rs 100 lakh with the bank for a loan of Rs 75 lakh would have a margin requirement of Rs 25 lakh. Margin requirements are a …
The functions of commercial banks in India are:
Quantitative and qualitative methods of credit control are two types of instruments used by the central bank of a country to regulate the money supply and interest rates in the economy. Here are some points to explain them: Quantitative Methods Qualitative Methods
Reverse repo rate is a term used in the banking and financial sector. It is related to the monetary policy of a country, which is the way the central bank manages the money supply and interest rates in the economy. Reverse repo rate is the opposite of repo rate. It is the interest rate which …
