Department Of Technical Education

Andhra Pradesh
Name Staff Member : P. BADARINARAYANA
Designation : Sr.Lecturer
Branch : DCCP
Institute : Govt. Polytechnic, NELLORE
Year/Semester : VI Semester
Subject : BANKING
Sub. Code : CCP-604(B)
Topic : Functions of RBI
Duration : 50 Mts.
Sub Topic : Credit Control
Teaching Aids : Animations
CCP604(B)41 1
Objective
On completion of this period you would
be able to
 Comprehend the function of RBI as
controller of credit

CCP604(B)41 2
Recap
 In the last lesson you have learned the
function of RBI as a Banker’ bank and as
a lender of last resort.
 Today we will see another function of
RBI as Controller of Credit.

CCP604(B)41 3
Credit Control
 The credit control function of RBI aims at
the promotion of steady rate of growth of
the economy by preventing the occurrence
of booms and slumps and
 unemployment has also at stabilization of
the domestic price level which is most
conducive to the national economic welfare.

CCP604(B)41 4
Credit control
 The banking Regulation Act, 1949 vests in the
RBI extensive power of control over the activities
of the entire banking system so as to regulate the
flow of credit in the economy.

CCP604(B)41 5
Credit Control
 Today, the RBI exercises complete control
over the activities of commercial and co-
operative banks in the country
 By determining their lending policy, the types
of commercial papers they may accept as
collateral securities against loans, their
lending rates and prescribing the rates of
interest they may pay on savings and time
deposit accounts.

CCP604(B)41 6
Credit Control
 The measures of credit control adopted by the
RBI may be classified into two categories.
They are
 A. Quantitative methods like bank rate policy,
open market operations, variable reserve
requirements and statutory liquidity
requirements and
 B. Qualitative methods which include selective
credit control, credit authorization/monitoring
and moral suasion.
CCP604(B)41 7
Summary

 In this lesson we have seen the function of

RBI as a controller of credit by quantitative
measures and qualitative measures.
 We will see in the next lesson, the details of
these measures.

CCP604(B)41 8
Frequently asked questions
1. Explain the function of RBI as the Controller of
Credit.

CCP604(B)41 9