Which one of the following is not an instrument of credit control in India?
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Which one of the following is not an instrument of credit control in India?
✓ Correct answer: d) Variable cost reserve ratios
ExplanationInstrument of credit control refers to the instruments that are introduced by the RBI to control the money supply.These can be classified into Quantitative and Qualified instruments.Quantitative instruments include Bank rate, Repo rate, Reverse Repo rate, CRR, SLR and Open Market Operations while Qualitative instruments include Margin requirement, Rationing of credit, Direct Action and Moral Suasion.Rationing of credit is introduced when the supply of credit is to be checked by the RBI, particularly for speculative activities.Direct action is adopted when commercial banks do not cooperate with the RBI in controlling credit.Open Market Operations refer to the purchase and sale of securities in the open market by the RBI on behalf of the government.Hence, the correct answer is “Variable cost reserve ratios”.
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