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credit policy & its key objectives.

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Credit Policy is a part and parcel of economic policy. It consists of all those measures through which Central Bank of the country i.e. BRI controls the supply of money to attain general economic objectives such as:

♦ Price stability
♦ Exchange rate stability
♦ Full employment
♦ Economic development

In India, credit policies are announced by RBI and following are key objectives of Credit Policy.

To encourage savings and mobilize savings for capital formation and development.
To encourage investment and create environment for investments in planned programmes.
Supply of adequate credit to meet increasing demand of activities so that overall economic development is encouraged.
To control inflationary pressure and maintain price stability.
To encourage economic development without financial hindrance.

 

 

The RBI formulates and implements the credit policy and monitors it through various tools and techniques. These are general quantitative techniques and qualitative selective techniques.

Quantitative Techniques used are:

⇒ Bank rate
⇒ Open Market Operations
⇒ Change in CRR/SLR

 

Qualitative methods of Credit Control are:

⇒ Rationing of credit
⇒ Changes in Margin requirements
⇒ Regulation of consumer credit
⇒ Direct action
⇒ Moral suasion

 

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