Question

Which of the following is not a quantitative method of credit control?

• A. Open market operations
• B. Marginal requirement of loan
• C. Cash reserve ratio
• D. Bank rate ratio

Hint:

Quantitative methods of credit control include tools like open market operations, cash reserve ratio, and bank rate, which directly impact the money supply and credit in the economy.

Answer 1

The Correct Option is B

Step 1: Understanding Credit Control Methods:
Credit control refers to the measures used by central banks to regulate the amount of money and credit in the economy. Quantitative methods of credit control affect the volume of credit in the economy.
Step 2: Analyzing the Options:
- Open market operations (A): This is a quantitative method where the central bank buys or sells government securities to control the money supply.
- Marginal requirement of loan (B): This is not a standard method of credit control. It refers to the collateral that banks must hold for loans, but it does not directly affect the overall volume of credit.
- Cash reserve ratio (C): This is a quantitative tool where the central bank requires commercial banks to keep a certain percentage of their deposits in reserve.
- Bank rate ratio (D): The bank rate is the interest rate at which the central bank lends to commercial banks. It is used as a tool to influence the amount of money in circulation.
Step 3: Conclusion:
The marginal requirement of loan is not a quantitative method of credit control, making option (B) the correct answer.