DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name Staff Member : P. BADARINARAYANA
Designation : Sr. Lecturer
Branch : DCCP
Institute : Govt. Polytechnic, NELLORE
Year/Semester : VI Semester
Subject : BANKING II
Sub. Code : CCP-604(B)
Topic : Functions of Reserve Bank of India
Duration : 50 Mts.
Sub Topic : Selective Credit Control
Teaching Aids : Animations
CCP604(B)47 1
Objective :

On completion of this period, you would be

able to
 Comprehend the Selective Credit Control
method of controlling credit by Reserve Bank of
India.

CCP604(B)47 2
Recap

In the last lesson we have seen the Statutory

Liquidity Ratio method adopted by the RBI.
 Today we will see another method namely
Selective Credit Control.

CCP604(B)47 3
Selective Credit Control
 So far we have seen the quantitative
methods of credit control adopted by the
RBI to regulate the volume of credit in
general and not for specific purposes or
areas.

 Regulating the flow of credit for specific

purposes or particular segments of
economy is known as Selective or
Qualitative Credit Control.
CCP604(B)47 4
Selective Credit Control

The Selective Credit Control aims at

encouraging such economic activities as
are regarded essential and conducive to
development and discouraging those
which are harmful for economic stability
and sustained growth of the economy.

CCP604(B)47 5
Selective Credit Control

The objective of Selective Credit

Control is one of preventing
speculative holding, with the help of
bank credit, of certain essential
commodities like food grains and
basic raw materials and thereby
checking an undue rise in their
prices.

CCP604(B)47 6
Selective Credit Control

Selective Credit Control is considered a

useful supplement to general credit
regulation and its effectiveness may be
greatly enhanced when used together
with general credit controls.

CCP604(B)47 7
Selective Credit Control
Banking Regulation Act 1949 gave powers
to RBI to use selective credit control.
The RBI issues directives to the scheduled banks
in respect of
 Their lending policies, the purposes for which
advances may or may not be granted
 The margins to be maintained on secured
advances
 The rate of interest charged

CCP604(B)47 8
Summary :

Today we have seen another credit

control method Selective Credit Control,
adopted by the RBI.
 To control the credit in the market.

CCP604(B)47 9
Frequently Asked Questions

1.Explain the Selective credit control method

adopted by the Reserve Bank of India.

CCP604(B)47 10