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Sanu Sahu

· started a discussion

· 1 Months ago

differnce (Question: 167538.0 )

please explain difference between credit rationing and credit ceiling

Question:

Which of the following is a quantitative instrument of monetary policy of the RBI?

Options:
A)

Credit rationing 

B)

Credit ceiling

C)

Moral Suasion

D)

All of the above

Solution:

Credit ceiling is a quantitative instrument of monetary policy of the RBI

Knowledge Expert

· commented

· 1 Months ago

Credit rationing:

Credit rationing is the limiting by lenders of the supply of additional credit to borrowers who demand funds, even if the latter are willing to pay higher interest rates. It is an example of market imperfection, or market failure, as the price mechanism fails to bring about equilibrium in the market.

credit ceiling:

In basic terms (since there are a large number of factors depending on the situation) a credit ceiling is the maximum amount that a person, company or entity can borrow. The term 'ceiling' is typically applied to corporations or governments where a person can't just call their bank to ask for more credit.
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