METHODS OF CREDIT CONTROL OR INSTRUMENTS OF MONETARY MANAGEMENT

Now we proceed to discuss the methods of credit control, also called the central banking techniques. There arc broadly speaking, two types of controls used by the central banks in modern times for regulating bank advances: («) Quantitative or General Credit Controls and (b) Qualitative Controls or the Selective Credit Controls. The aim of the quantitative controls is to regulate the amount of bank advances. i.e., to make the banks lend more or lend less. The object of the selective credit controls is to divert bank advances into certain channels or to discourage them from lending for certain purposes. These selective controls have of late assumed great importance. The following are the principal methods 0/ credit control used by the central banks in modern times

Quantitative or General Controls

(i) Manipulation of the Hank Hate;
Iii) Open market operations,
liii) Varying reserve requirements:
il’) Credit rationing;