Multiple choice

Which of the following tools is used by RBI for selective credit control?

  1. It advises banks to lend against certain commodities.

  2. It advises banks to recall the loans for advances against certain commodities.

  3. It advises banks to charge higher rate of interest for advance against certain commodities.

  4. It discourages certain kinds of lending by assigning higher risk weights to the loans it deems undesirable.

  5. None of these
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A Correct answer
Explanation

Correct Answer: It advises banks to lend against certain commodities. Selective credit control is used to restrict bank finance against sensitive commodities (food grains, sugar, gur, cotton textiles, raw cotton, kapas). 

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