Instrument of credit control can be divided into two –
Qualitative / selective / direct credit control.
Quantitative / general credit control.
Qualitative / selective / direct credit control –
These measures are used to make sure that purpose for which loan is given is not misused.
It is done through credit rationing and regulating loan to consumption etc.
Quantitative / general credit control –
Used to control the volume of credit and indirectly to control the inflationary and deflationary pressures caused by expansion and contraction of credit.
It consists of –
Bank rate / Rediscount rate.
It is the rate at which the RBI gives finance to commercial banks.
Cash reserve ratio (CRR) –
Since 1962, the RBI has been empowered to vary the CRR requirement between 3% and 15% of the total demand and time deposits.
The RBI (amendment) bill, 2006 empowers RBI to prescribe CRR cash that banks deposits with the RBI without any floor rate or ceiling rate.
Statutory liquidity ratio (SLR) –
Ratio of liquid asset which all commercial banks have to keep in the form of cash, gold and unencumbered approved securities equal to not more than 40% of their total demand and time deposits liabilities.
Repo rate –
That rate at which RBI lends short term money to the banks against securities.
Repo rate injects liquidity to the market.
Reverse repo rate –
Rate at which banks park short term excess liquidity with the RBI.
Reverse repo rate withdraws liquidity from the market.
This is always 100 base point / 1% less than repo rate.
Open market operations (OMOs) –
When RBI sells government securities in the market, it withdraws money liquidity from the market and thus reduces volume of credit leading to control of inflation.
When RBI buys government securities, it injects liquidity into the market and thus increases credit volume leading to higher economic growth.
Banking ombudsman scheme –
It is in operation since 1995 and works under the control and supervision of the RBI.
It is applicable to all the commercial banks, RRBs and scheduled primary co-operative banks.
At present there are 15 banking ombudsmen in India.
There is RBI’s quasi judicial authority for resolving disputes between commercial banks, primary co-operative and RRB’s and their customers.
State bank of India (SBI) –
In 1921, bank of Calcutta (bank of Bengal), bank of Bombay and bank of Madras unified as Imperial bank of India.
Imperial bank of India was reconstituted as SBI in 1955.
In 1959, the state bank of India (subsidiary banks) act was passed. This made SBI take over eight former state associated banks as its subsidiaries.
Arundhati bhattacharya became the first women head of SBI.
SBI is ranked 292 in fortune 500 companies.
Bhartiya mahila bank (BMB) –
Dr. Manmohan Singh and Sonia Gandhi jointly inaugurated India’s first all women bank in Mumbai on 19th Nov 2013 on birth anniversary of Indira Gandhi.
Its initial capital was 1000 crore.
Its focus is on the banking needs of women and to promote their economic empowerment.
Union government on 12th Nov 2013 appointed Usha Anantha Subramanian as its first chairperson and managing director.
It is the only and the first public sector bank incorporated through an act of parliament.
Its branches are in Mumbai, Kolkata, Chennai, Ahmadabad, Guwahati, Bengaluru and Lucknow.