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Banking Book

Banking Book

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Publicado por9290010274
Banking Book
Banking Book

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Published by: 9290010274 on Nov 08, 2011
Direitos Autorais:Attribution Non-commercial


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The Reserve Bank implemented various measures of qualitative control to channelise the flow
of credit into productive sectors and restricted the financing of speculative and unproductive
activities. The successful operation of selective credit controls, however, suffers from the
following limitations:

(a) Traders mostly use their own finance for holding stocks of commodities. This self-
financing or private financing reduces the rate of bank finance and its influence.
(b) Traders may manage to get credit from non-controlled sectors and use it in controlled
sectors. It is very difficult to ensure that the borrowers use the amount for the purpose
for which it is borrowed.
(c) The Reserve Bank has no control over the activities of non-banking financial
institutions as well as indigenous bankers. These institutions and bankers play a
significant role in financing trade and industry in Indian economy.
(d) The Reserve Bank is not fully equipped with tools and powers to control effectively
the inflationary trends in the country. Its general and selective controls are effective
only to the extent to which inflationary pressures are the result of bank finance.
But the Reserve Bank’s credit control measures may not prove effective in case, the
inflationary pressures are caused by deficit financing and shortage of goods.



(e) Existence of large quantity of money in the black market also poses a serious
limitation to the credit policy of the Reserve Bank. Speculation and hoarding are
also carried on with the help of black money. The Reserve Bank could not exercise
its effective control over the expansion of black money in the Indian economy.
The methods of selective control are more suitable for under developed countries
like India. It is essential to divert credit to more essential industries for speedier
economic development. The methods of selective credit control can prove helpful in
the achievement of this objective. If the Reserve Bank has not undertaken different
selective control methods to check inflationary pressures, the price position in the
country might have been some what worse. The selective credit controls, if they are
applied along with quantitative credit control methods, have a great role to play in
our planned economy.

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