11th Commerce coaching classes | 12th | CA/CS Foundation | BCom | BBA Behere Classes Series on Basics of Economics Part 9: Qualitative Instruments of Monetary Policy Monetary policy refers to the credit-control measures adopted by the central bank of a country i.e. RBI in the case of India. The main objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition for sustainable growth. Various instruments are used by RBI to achieve this objective. There are two types of instruments of monetary policy used by the RBI: 1. Quantitative, general or indirect (e.g. CRR, SLR, Open market operations, bank rate, the repo rate, reverse repo rate) 2. Qualitative, selective or direct (e.g. change in the margin money, direct action, moral suasion) In this article, we will be discussing the qualitative tools used by RBI. ➤ MARGIN REQUIREMENTS/ LTV It refers to the % money lent against specified collateral. Eg. If margin requirement is 20% then a person keeping 100 crores worth collateral with the bank can secure a loan worth 80 crores only. If there is a recession in a particular sector, the central bank encourages borrowing by lowering margin requirements and vice-a-versa in case of the boom. ➤ CONSUMER CREDIT REGULATION This refers to the minimum amount of downpayment and EMI. By controlling these two things RBI controls the money supply. ➤ SELECTIVE CREDIT CONTROL Under this RBI can instruct banks to favour loans to specific sectors to make loans difficult in specific sectors. These controls are used to influence specific types of credit for particular purposes ➤ MORAL SUASION In this method, RBI urges commercial banks to help in controlling the supply of money in the economy. In addition to these measures, RBI also uses many quantitative tools to regulate credit flow. These tools are discussed in the previous article. (Link: http://www.behereclasses.com/latest-update/top-commerce-coachin/170) Thank You. Tags: Best 11th commerce classes in Pune, 11th commerce class in Pune, top commerce coaching in pune, Commerce classes in Pune city, 12th commerce classes in Pune, 12th commerce class in Pune, commerce classes near me, best commerce classes near me, 11th 12th commerce classes near me, BBA coaching classes in Pune, BBA classes near me, BCom classes in Pune, BCom classes near me, BBA tuitions near me, Pune 11th commerce classes, tuitions for 11th commerce, CA foundation classes, CS foundation classes, best CA foundation classes, best CS foundation classes, BCom tuitions near me, commerce tuitions near me, classes for 11th commerce, CA classes in Pune