Quantitative method of Credit control - Central Banking, Indian Financial system Video Lecture | Indian Financial System - B Com

in this video we will be studying about
how the central bank controlled the
slope credit in the car
see there are two instruments to through
which the central bank controlling slow
steady one are the quantitative the
second happy qualitative instructions in
this video we will be discussing about
the quantitative instrument of credit
control right so you have to write if it
comes how the central bank control slope
creditors economy or both of these
instruments or what are the principal
instruments of monetary policy of the
central bank's then also these both of
these instruments you will discuss the
first we will learn about the real bank
rate T bankers it is the rate at which
the commercial de barros deal money to
the essentials are again to fulfill the
long-term needs so currently your bank
rate current bank riedel's
6.75% see this sometimes what happens
your commercial path seeing the shortest
the end of there's a huge credit the one
but two central bank Amato money to give
it to these people so that kind of time
is very short us with the commercial
bank they can go to the central bank and
ask for Dino or they can borrow these a
money from the central path so the rate
at which they borrow the money from the
central one is the battery so currently
the back greater 6.75% see what happens
how the central bank controls this
credit flow if they increase back it if
the bank rate is increased which means
the central bank has to pay more
interest on what commercial banks have
to pay more interest in what they borrow
in that case they will reduce the credit
flow they do they won't be able to get
the loan from the center back or they
will take a letter loan from the central
bank so this will ultimately reduce the
critics flow in the economy be saying is
your open market operations now what
central bank do is they indulge into to
buy or sell of securities the government
security they can buy until the
government authorities so they indulge
into the buying and selling of these one
securities in the open market so if this
says be securities in the market what
will happen people will take these
shares and they will give this money to
the central back to what happens the
cash from the economy is boiled to the
FBI because if R velvel sells securities
the cash will go to the RBI people will
say the cash in respect of purchasing to
security from the audience what will
happen the flow of cash in the economy
will reduce as the cash will be healthy
argument so in this way it will reduce
this credit flow and if the central bank
by the security if the central bank will
buy this Authority from the public what
will happen the central bank has to give
the cash to the public so in this where
the flow of cash will increase in the
Baptist in the economy will increase
so this will lead to the more credit
multiplier in this way it affects the
credit for flow of credit in the carnage
this third one we have a cash with
operation a lot of cash reserve ratio
CRR refers to that percentage of
deposits with the commercial man
which these bags are legally required to
keep a reserve with the central path so
see if there is a deposit of 10,000 in
the Commercial Bank State Bank of India
and see our our is they'll say 20
persons so rupees 2000 they have to keep
send it to this central vac as Oh
so these caches are vegetables crlf to
that person of deposits with the
commercial bath which these bags are
legally required to keep as reserve with
the central path so this mm is this er
account these amount that will be sent
by the commercial banks to the central
pants on the deposits ticket so this is
how a suit erh increases there will be
less money now a torment is OGT among
left with the commercial banks to give
credits so if this percentage increases
there will be the flow of character it
will reduce in the pocket if Siara
increases the flow of credit will be
will be market now what is the statutory
liquidity ratio see this is the ratio if
there are 20,000 of deposits with the
commercial sign
and your SL are elected to different
which means to be six thousand services
comments commercial banks have to keep
in the form of cash with them on these
daily basis so they have to maintain me
capital liquidity ratio means they have
to keep the deposit into the liquid in
the form of the liquid assets up to the
30 percent of the deposit state have so
your f F R it is the minimal percentage
of deposits with the commercial van
which these are legally required to keep
in the form specified liquidated as
reserves with themselves and see if your
SLR increases again your credit creation
or this slope rate will decrease because
there will be more cash whereas credit
creation is done from account to account
on demand deposits to do my performance
I was explaining in the coming video but
for now in understand if you started
liquidation tables your credit creation
will decrease in the market now what are
the average we did about the back to
this video the back weight was the
interest rate that the central bank
charges from the commercial banks on
giving loan to the commercial acts like
but that was for a long period of time
that was for money or - we're seeing but
what is the definite it is the interest
rate
at which your commercial back can borrow
from the central bank to meet they're
shocked on Eubank read and use it for me
to say but you back through this for the
long term and your separate is what this
short run now I just pictures for seven
days you shot them nearly 70 if you take
your on with a parade you need to repay
that going on which is d 7h to be
central back now if the central banks
want to increase the credit flow in the
masses what they will do they will
reduce these over it because the
interest rate is reduced
what commercial grants will you take to
take more and more loans from the
commercials are from the centers and
equity credit creation so this is the
decorate the six is your reverse
separator
now what is the worst rate for it the
previous video to your bank rate and you
say put it we did that a few generatio
commercial bank borrows money the
interest rate charged by the gentleman
now out of the world therefore is if the
commercial bank deposits tell funds with
the central man and the central bank on
that if the interest to the commercial
path if you're divorced therefore wait
so this is the interest rate at which
the commercial van can be positive
they're fine
with the central bag seneschal them so
the previously treated wool they used to
borrow the money from the central bank
and they have to pay interest but this
is the rate in which the center of
commercial banks get into it from the
central bank on depositing difference
with them now what happens if the RR is
increased by the central fan more and
more funds will be deposited by the
commercial banks to the central bank and
they will create credit layer so this
will reduce in credit slow in the
economy or vice versa
and what we wanted to respond to it is
instruments now we make sure you is
studying about the qualitative
instruments I hope you liked the video
please download our Spanish learning app
and enjoy the learning experience with
us