economics

Rationing of Credit

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

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Moral Suasion

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

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Margin Requirements

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

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Reverse Repo Rate

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

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Bank Rate

Bank rate is an important concept in economics that affects the interest rates, money supply, inflation, and growth in a country. What is bank rate? Bank rate is the interest rate at which the central bank of a country lends money to commercial banks. For example, in India, the central bank is the Reserve Bank

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Cash Reserve Ratio (CRR)

Cash reserve ratio (CRR) is the percentage of total deposits that commercial banks have to keep as cash reserves with the central bank of their country. For example, in India, the central bank is the Reserve Bank of India (RBI), and the current CRR is 4.5%. This means that for every 100 rupees deposited in

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Government Securities

Government securities are debt instruments issued by a sovereign government to raise funds for various purposes, such as financing public projects, managing budget deficits, or paying off existing debts. From the investor perspective they are considered to be low-risk investments, as they are backed by the full faith and credit of the issuing government. Investors who

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