Module -7: Regulatory Authority-Rbi

Module -7: Regulatory
Quantitative and qualitative
credit control measures .
 What is Credit Control: Credit Control is an important tool
used by the Reserve Bank of India, a major weapon of the
monetary policy used to control the demand and supply of money
(liquidity) in the economy.
Methods of credit control
(1) Qualitative
1. Marginal
2. Rationing of
3. Publicity
4. Direct Action
5. Moral Suasion
(2) Quantitative
1.Bank Rate
2.Open Market
3. Repo Rates
and Reverse
Repo Rates
4. Cash Reserve
5. Statutory
Liquidity Ratio
6. Deployment of
Functions of the RBI
a) Monetary functions ( Central banking functions)
1. Bank of issue: RBI has the sole right to issue bank notes of all
denominations. Coins – finance ministry of India, currency
notes – RBI
2. Government banker: RBI acts as government banker , agent
and advisor . The bank has the obligation to transact
government business .
3. Banker’s bank and lender of the last resort: the provisions of
RBI Act 1934, tells that every scheduled bank has to maintain
cash balances with the RBI equal to 5% of its demand deposit
and 2 % of its time deposit
4. Controller of Credit: has the power to influence the volume
of credit created by the banks in India
5. Custodian of foreign exchange reserves: RBI has the
responsibility to maintain the official rate of exchange
b) Non- monetary functions:
1. Supervisory functions: has wide powers of supervision and
control over all scheduled banks relating to licensing and
establishment , branch expansion , liquidity od their assets etc.
2. Promotional functions: RBI promotes banking habits , extend
banking facility to rural and semi urban areas and establish
and promote new specialized agencies