Q.Distinguish between quantitative and qualitative methods of credit control, giving two examples of each.

The heart of the difference is what each family of methods controls: the total amount of credit versus its particular use.

As Section c explains, the RBI controls credit through two broad families of methods that differ in what they act upon.

Quantitative (general) methods affect the total volume of credit in the whole economy, without singling out any particular purpose. They raise or lower the overall amount of credit available. Examples: the bank rate (the rate at which the RBI lends to banks) and the cash reserve ratio (the share of deposits banks must keep with the RBI); open market operations (buying/selling securities) is a third.

Qualitative (selective) methods affect the use and direction of credit — encouraging it toward desirable purposes and discouraging it from undesirable ones such as speculation or hoarding, without necessarily changing the total. Examples: margin requirements (the gap between the value of security and the loan granted, raised to discourage borrowing against a particular commodity) and moral suasion (the RBI persuading banks to follow its policy); credit rationing and regulation of consumer credit are further examples. …

A frequent slip is putting a tool in the wrong family — e.g. calling CRR a selective method. Keep the two lists memorised, and remember the one-line tes …