(A) Quantitative measures:

The quantitative measures of bank control are discussed below.

1. Bank rate:

• Bank rate is the rate of interest which Reserve Bank of India charges on the loans and advances that it gives to the commercial banks for long term.
• At times, the commercial banks have shortage of funds and due to this reason, they borrow money which has to be repaid back with interest within the stipulated time period.

2. Repo rate and reverse repo rate:

• When banks need money they approach RBI. The rate at which banks borrow money from the RBI by selling their surplus government securities to RBI is known as “Repo Rate.”
•  Reverse Repo rate is a short term borrowing rate at which RBI borrows money from commercial banks.
• Here, the RBI sells certain government securities to the commercial banks with an agreement of purchasing them back at a discounted rate at the end of short term period.

3. Stabilization under emergency situation:

• At times there might occur some emergency of acute shortage of cash with the commercial banks.
• Under such situations there is a special window for banks where RBI provides money to commercial banks against approved government securities.
• This rate is higher than repo rate and is known as ‘Marginal standing facility’. This helps in stabilizing the inflation under emergency situation.

4. Cash Reserve Ratio (CRR):

• Cash Reserve Ratio is the specified percentage of the total deposits of customers of the commercial bank that the bank has to maintain with the RBI.
• The increase or decrease in the rate of CRR directly effects controlling inflation and deflation respectively.

5. Statutory Liquidity Ratio (SLR):

Statutory Liquidity Ratio is the percentage of total deposits (25% or more) that the commercial banks have to maintain with RBI in form of cash, gold and government-approved securities.

6. Open Market Operation (OMOs):

• When RBI purchases or sells government securities/bond in the open market it is called Open Market Operations (OMOs).
• The sale or purchase made by RBI affects the inflation.

7. Sterilization of RBI accounts against shocks arising from the excessive increase or decrease in amount of foreign exchange:

Sterilization is a form of monetary action in which a central bank seeks to limit the effect of inflows and outflows of money supply in the economy.

(B) Qualitative measures:

1. Collateral security:

• When bank lends money to individual, it demands some asset as mortgage for security of the loan. This is known as collateral security.
• This security can be jewelry, fixed deposits, car, house, land, etc.
• RBI promotes and encourages commercial banks to take such steps so that all the segments of people especially poor in India can attain the benefit of bank credit and hence help to improve country’s economy.

2. Margin requirement:

• Margin requirement is the limit that is set by RBI for granting loans against security.
• An individual is offered only certain percentage of the total value of the asset (security) as loan.

3. Ceiling on credit:

• RBI fixes a limit on the loans that the commercial banks can give to the people.
• In other words, commercial banks cannot exceed the maximum limit (ceiling) that the RBI has fixed for specific categories.

4. Discriminatory interest rates:

• Banks charges different rate of interest on different types of loans and advances and also charges differently to different economic class of people.
• For example, the bank may charge less interest rate on the loan given to a farmer for agricultural development and may charge more interest rate on the loan given to a businessman.