Central banking and monetary controls (1)

Quantitative Measures : Regulate the quantity of credit but not use of creditBank Rate Rate at which RBI lends money to domestic banking systemBank rate is the minimum rate at which the central bank of a country provides funds to commercial banksBy raising or lowering the bank rate the central bank can contract or expand the credit of the commercial banksWhen bank rate is raised , cost of borrowing by the commercial banks from the central bank goes up. This increases the lending rates of commercial banks which may compel the borrowers to borrow lessBank rate is raised when there is inflationary situation in the economy