Explain the central bank's credit formation tools for debt control and credit formation

What is the need for central bank credit formation?

 Answer:

Requirement of Debt Control: 

The law empowers commercial banks to generate credit money. Money generated by a merchant bank is called 'credit money. In short, the credit of a commercial bank is the additional purchasing power created by a commercial bank. As credit increases, so does the supply of money. This creates a boom in the economy. The opposite happened the total supply of money decreased. As prices fall, so does the economy. Both the ups and downs are detrimental to the economy. The central bank manages the recession. For this, it implements a monetary policy. The central bank controls the supply of money to the economy. This is called fall control. In short, commercial banks generate huge sums of money for the purpose of making a profit and are immediately reluctant to give credit in times of crisis. In both cases, there is a loss of economy. Therefore, it is necessary to control the fall of the central bank to accelerate economic growth by avoiding such losses. 

Why central bank control? 

The main reasons to do so are as follows

1.  Exactly the amount of credit that the central bank needs in the economy As guessed
2.  As the central bank is the bank of the bank. 
3. The central bank has a monopoly on currency creation and currency destruction is
4. As the central bank handles all the monetary problems in the economy
5.  As the functions of fall control are not possible by the government
6. As the central bank controls other commercial banks

 Explain the main objectives of central bank fall control?

 Answer:

The objective of Credit Control: The central bank of the country performs the function of control of credit by keeping in view certain objectives while controlling the credit of commercial banks. These are called the main objectives of fall control. Those objectives can be stated as follows. 

1) Maintaining price stability

Commodity prices in the economy depend on the money supply of the economy. There is a positive correlation between money supply and commodity price level. Commodity prices rise when extra money is generated in the country. On the other hand, a downturn in the money supply is likely to lead to a recession. Also, frequent fluctuations in commodity prices affect the economy of a country. So central to maintaining price stability in the country The bank controls the fall.

2) Promoting economic development

In order to achieve what is considered to be the main objective of the economy in recent times, the central bank provides financial facilities to the backward and underdeveloped areas and provides them with the required amount of money thus promoting economic growth with balanced development of the economy as a whole.

3) Exchange rate stability

The exchange rate is the exchange rate of the currency of one country with the currency of another. If this exchange rate is not stable, it will adversely affect the balance of international trade and foreign trade. Therefore, fall control is used to maintain exchange rate stability.

4) To increase trade

The main function of a currency is to facilitate transactions in the economy and to increase trade. Therefore, it is necessary to increase the money supply as the trade in the country grows. It also has to be reduced beyond their means. Thus, in order to coordinate trade and money supply in the country, it is necessary to control the fall of the central bank. 

5) To control the trade cycle

One of the most important objectives in controlling the decline is to control the trade cycle. Because the formation of the trade cycle is an integral part of the capitalist economy. Therefore, such cycles of ups and downs continue in the economy. They cannot be stopped. However, with the help of fall control, their intensity can be reduced. The boom-bust cycle creates economic instability in the economy and creates economic instability in the economy which adversely affects the economy. To prevent this, the central bank performs fall control functions.

6) Establishing stability in the coin market

The coin market supplies money to the economy for a short period of time. Therefore, to meet the need for money in the economy, there must always be stability in the coin market. For this, the central banks create stability in the coin market with the help of fall control.

7) Reducing the fluctuations between production and employment

 The level of production and employment in any country depends on the money supply in that country i.e. capital. The central bank controls capital formation through the instrument of fall control. Therefore, in production and job creation As fluctuations decrease, so do production and employment. In short, for the fulfillment of all the above objectives and for the economic development of the country The central bank acts as a regulator to drive growth.

Explain how to control falls? (Measures of Credit-Control) north 

The central bank uses a variety of tools in controlling the fall. It is broadly divided into two groups, quantitative and qualitative. Depending on the time, the central bank uses both of these tools to a greater or lesser extent. Those tools can be described as follows.

Fall control tools

Numerical tools

(Quantitative Credit Control

Qualitative Credit Control

1) Bandar

1. The proportion of loan and mortgage 
2. Ethical explanation

2) Cash in an open market

1. Buying and selling
2. Qualitative tools

3) In proportion to the reserve fund.

1.  Consumer debt control Changes 

4) Statutory withholding ratio

4. Loans for a specific reason

5. Debt Rationing

6. Fame

7. Quantative Credit Control:

'The means by which the central bank manages to increase or decrease the amount of money in the economy. That tool is called a numerical tool. The purpose of the central bank is to control the number of currencies in the economy. Only then is the numerical tool used. Their main objective is to reduce the amount of credit by curbing the credit formation of commercial banks in the country. Husbandry is controlled by assuming that commercial banks are responsible for the economic situation in the country. Because commodity prices in the economy depend on various factors. So the central bank of money The merchant controls the bank's credit formation to control the numbers. Because the amount of money in the economy depends on credit money. The central bank controls money using the following tools in a numerical tool to control credit.