To achieve internal price stability in the market,
To achieve financial stability in the money market,
To achieve stability in foreign exchange policy,
To meet the financial requirement with available resources,
To maximize income, output, and employment in the country,
To eliminate business cycle and meet the business needs,
To promote economic growth and development of the country,
Instruments of credit controls
Instruments to be used during controlling credit can be categorized into two categories which are mentioned below;
- Qualitative measure of credit control
Unlike quantitative measure of credit control, under this method, central bank just monitors and regulates the flow of credit into the particular direction in the economy. For example, it does not cut the limit of credit of commercial banks but direct that
credit follow towards particular sectors in economy. Instruments used under this method to direct credit follow are as follows;
- Credit rationing
- Consumer credit control
- Margin requirements
- Moral suasion
- Direct Action
In the end, central bank control credit for the price stability in the economy and its growth and development and to prevent commercial banks from granting loans to the customers who are not able to repay loan amount.
