Question : Which one of the following is not an instrument of credit control in India?
Option 1: Rationing of credit
Option 2: Direct action
Option 3: Open market operations
Option 4: Variable cost reserve ratios
Correct Answer: Variable cost reserve ratios
Solution : The correct option is Variable cost reserve ratios .
The objective of the variable reserve ratio (Cash Reserve Ratio), which is a quantitative technique, is to manage just the volume of credit, not the volume and purpose of the credit for which the bank makes loans. For these goals, both the qualitative approach and the selective control method are utilised. It has several drawbacks.
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