CA Foundation · Business Economics · Money Market
Which of the following is a selective (qualitative) instrument of credit control rather than a general quantitative tool of the RBI?
Moral suasion is the qualitative instrument. The RBI persuades banks through advice, appeals and discussions to follow its policy direction. Bank Rate, open market operations and the Cash Reserve Ratio are quantitative tools that act on the overall cost or quantity of credit.
- ABank Rate
- BOpen market operations
- CMoral suasionCorrect
- DCash Reserve Ratio
Explanation
Bank Rate, OMO and CRR are quantitative tools that affect the overall volume or cost of credit. Moral suasion is a qualitative method in which the RBI persuades banks through advice and appeals to follow its policy stance, without changing rates or ratios.
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