Solution

The various methods employed by the RBI to control the credit creation power of the commercial banks can be classified into two groups, viz., quantitative controls and qualitative controls. Quantitative controls are designed to regulate the volume of credit created by the banking system qualitative measures or selective methods are designed to regulate the flow of credit in specific uses. Quantitative methods of credit control include Ø  banks rate policy, Ø  open market operations and Ø  variable reserve ratio. Qualitative or selective methods of credit control include Ø  regulation of margin requirement, Ø  credit rationing, Ø  regulation of consumer credit and direct action.