Qualitative Credit Control Methods

Qualitative credit control methods are those methods that are used by the central bank to influence the credit creation capacity of the commercial banks. They do not involve any direct intervention in the money market by the central bank. The following methods are used as qualitative credit control methods:

a) Credit Rationing: In this method, the central bank controls the credit supply by giving instructions to the commercial banks to limit the amount of credit they can extend to their customers.

b) Publicity and Notification: The central bank uses this method to make the public aware of the credit policies of the government to influence their borrowing and lending decisions.

c) Regulation of consumer credit: The central bank regulates consumer credit by imposing restrictions on the amount of credit that can be extended for the purchase of certain goods and services.

d) Moral Suasion: This method involves the central bank using its influence and credibility to persuade the commercial banks to follow certain credit policies.

Non-Qualitative Credit Control Method

e) Changes in cash reserve of Commercial banks: This is a quantitative method of credit control. The central bank changes the minimum cash reserve ratio that commercial banks are required to maintain with the central bank. This method directly affects the money supply in the economy and is a powerful tool in the hands of the central bank.

Correct answer: B (Changes in cash reserve of Commercial banks)

Explanation: Changes in cash reserve ratio is a quantitative method of credit control, as it directly affects the money supply in the economy. It does not come under the purview of qualitative credit control methods, which are indirect methods of influencing credit creation.

Yaaa B is quantitative related to CRR