ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a) RBI may request commercial banks to not to give loans for unproductive purpose
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b) So that which may increases inflation
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c) Because it does not add to economic development
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d) None of These
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Unattempted
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Detailed explanation-1: -Moral Suasion Example A famous example of the use of moral suasion is the New York Federal Reserve’s intervention in the bailout of Long-Term Capital Management (LTCM) in 1998.
Detailed explanation-2: -Moral suasion is a qualitative method of credit control, being used by the central bank. Under this method, the Central Bank merely uses its moral influence on the commercial banks. It includes the advice, suggestion request and persuasion with the commercial banks to co-operate with the Central Bank.
Detailed explanation-3: -Moral Suasion refers to a type of influencing procedure which is applied by Central Banks to keep the pressure on commercial banks in order to abide by the monetary policies that are established. It is carried out by transferring speeches, seminars and meetings.
Detailed explanation-4: -Moral suasion is a request by the RBI to the commercial banks to take specific measures as per the economy’s trends. For instance, RBI may direct banks not to give out certain loans. It includes psychological means and informal means of selective credit control.