Which of the following monetary policy instruments represents a qualitative tool used by the Reserve Bank of India to regulate credit?

💡 Solution & Explanation

Qualitative or selective credit controls employed by the Reserve Bank of India include moral suasion, margin requirements, direct action, and credit rationing, which target specific sectors or uses of credit. In contrast, quantitative instruments like the cash reserve ratio, statutory liquidity ratio, and repo rate influence the overall volume of money and credit across the entire banking system. Margin requirements dictate the proportion of a loan value that a borrower must finance through their own funds. Moral suasion involves persuasive communication between the central bank and commercial banks to align credit creation with national economic objectives.