Multiple choice

Which one 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 loans it deems undesirable.

  5. None of these
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A Correct answer
Explanation

Selective credit control is a qualitative tool used by RBI to control credit flow to specific sectors. The primary method is through margin requirements and directing banks on lending against certain commodities, rather than blanket loan recalls or interest rate changes.

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