Provides a clear and understandable content for the understanding of credit policies

1. RBI
CREDIT POLICIES
By
Shaik Tahura fatima

2. Credit policy
2
Credit policy is government policy at a
particular time on how easy or difficult
it should be for people and businesses to
borrow money and how much it will cost.
This is done through change in interest rates.
In India this is done by the
monetary regulatory authority of India i.e.
Reserve bank of India
The Banking Regulation Act, 1949 has given
extensive power to the RBI to apply selective
credit control.

3. 3
Bankersbank

4. Functions
"to regulate the issue of Bank notes and keeping of reserves
with a view to securing monetary stability in India and
generally to operate the currency and credit system of the
country to its advantage; to have a modern monetary policy
framework to meet the challenge of an increasingly
complex economy, to maintain price stability while keeping
in mind the objective of growth."
Commenced on 1st April 1935.
Nationalized on 1st January 1949
4

5. 5
Credit Control Methods
Quantitative measures Qualitative Measures
Reserve Ratios
Cash reserve ratio
Statutory liquidity ratio
•Credit rationing
•Consumer credit controls
•Margin requirements
•Direct action
Open Market Operations
Policy Rates
Bank rate
Repo rate
Reverse repo rate
Credit control Instruments

6. 6
Quantitative measures

7. 7
Cash Reserve Ratio
The share of a bank’s total deposit that is
mandated by the Reserve Bank of India
(RBI) to be maintained in the form of cash

8. 8

9. 9
Statutory Liquid Ratio
The share of bank’s total deposit that it needs
to maintain itself as liquid assets’.

10. 10

11. Bank Rate
Bank rate is the rate charged
by the central bank for
lending funds to
commercial banks.
11

12. Open Market Operations
12
Open market operations are conducted by the RBI by way of sale
or purchase of government securities (g-secs) to adjust money
supply conditions.

13. 13
Repo Rate
The rate at which commercial banks borrow money
from the Reserve bank of India (RBI) in case
of shortage of funds.
Reverse Repo rate
The rate at which RBI lends from Commercial Banks.
The RBI borrows money to control the money
supply in the country

14. 14

15. 15
Bank Rate Cash Reserve Ratio Statutory liquidity
ratio
Repo rate Reverse
repo rate
14/10/2017 6.25 4.00 19.50 6.00 5.75
06/06/2018 6.50 4.00 19.50 6.25 6.00
01/08/2018 6.25 4.00 19.50 6.50 6.25
22/10/2018 6.75 4.00 19.50 6.50 6.25
OMO for the aggregate of Rs.400
Billion in the Month of November.

16. 16
Qualitative Measures

17. Credit Rationing
17
Regulating the purposes for which the loans
Are given among the various member banks.
•Overall development of a nation
•Preference in lending loans.
•Optimum utilization of money.
•Finance distribution

18. Margin Requirement
18
Introduced in India in 1956.
Denotes that part of the loan amount,
•Which cannot be borrowed from bank.
•Brought by the borrower from own source.
The RBI has power to vary the margin requirements
depending upon the business conditions
prevailing in the country.

19. Consumer credit Controls
Monitoring and scrutinizing all bank
credits exceeding
 Rs.5 crores to any single party for
working capital needs
 Rs.2 crores in the form of term loans.
19

20. Direct Action
Since 1956, the RBI has issued many directions
to the banks.
× The RBI fixed higher minimum lending rates
for loans given subject to selective credit
controls.
× RBI had put up certain restrictions on the
working of the Metropolitan co-operative
banks.
20

21. .
21
Thank you