Difficulties of Credit Control

Economics Assignment Help Online

Difficulties of Credit Control

There arc several difficulties in the way of the central bank being able to cuntrol credit: First, bank credit is not the only form of credit. There is commercial credit like hook credit, bills of exchange and promissory notes (nol discounted by banks). Over these, the central hank has little control. They are as much purchasing power as any other form of credit. Secondly, even as regards bank credit, all banks of the country do .iot have direct relations with the central hank. In the U.S.A. for instance, one-half of thc commercial banks with one-fifth of resources arc outside the Federal Reserve System. In India, the indigenous hankers, accounung for nearly 90 per cent of the banking business in the country, arc till beyond the influence of the Reserve Ban Thirdly, even if all banks were m mbe -banks, commercial banks may I ot alw a) o-opcrate with the central banks and may not follow it. I ad. Such cooperation. as we shall see, in indio pen able for a successful control of credit. Fourthly, there aJ’C non-banking clements in the financial structure of a country. Among these arc the various circumstances that affect the temper of the business community. These arcbeyond the scope of central banking action. Finally, the central bank cannot control the ultimate use to which credit may be put. Strictly commercial loans. for instance. may be used for speculative purposes. Conclusion. This, however, docs not mean that any attempt to control credit ol~the part of the central bank is bound to fail. These ace the limitations to which the action of the ccntralbank is subject.

Other Similar Economics Assignments like

Difficulties of Credit Control