How is RBI controlling commercial banks Economics CBSE class 11 ncert

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How is RBI controlling commercial banks? -Economics CBSE class 11 ncert

Book: Indian Economic Development
Chapter 3: Liberalism, Privitisation and Globalisation: An appraisal
 (NCERT textbook questions)


By:Aparna-Dasgupta

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Commercial banks in India are controlled through the rules and regulations formulated by the Reserve Bank of India (RBI). RBI uses quantitative and qualitative instruments to control and regulate banking operations. 
Quantitative instruments of credit control are designed to regulate the total volume of credit in an economy. It affects all the sectors making use of bank credit. It includes cash reserve ratios, open market operation, repo rates, reserve repo rates and bank rates.
Qualitative instruments of credit control are designed to regulate the direction of credit. It affects the flow of credit for a particular use. It includes margin requirements, moral suasion and selective credit controls.
Thus, the RBI controls commercial banks by using its quantitative and qualitative instruments of credit controls. 

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