Can You Describe The Quantitative Controls Of Central Bank?

1. Bank rate policy or discount rate policy: The rate at which the central bank re-discounts the bills offered by the scheduled bank. During inflation, the central bank increases bank rate and during deflation this bank decreases the bank rate.

2. Open market operation: The central bank purchases and sells government, securities shares and bonds in the open market. In case of inflation, the central bank sells public securities in the open market. On the other hand, during deflation, the central bank purchases government, securities and shares in the open market.

3. Change the reserve ratio: The scheduled banks are registered with the central bank. They keep some portion of cash with central bank as a cash reserve. During inflation period this ratio is increased and in deflation period, this ratio is decreased for the expansion of credit in the country.

4. Credit rationing: If the central bank wants to control over the expansion of credit it can fix the amount of credit for each member bank, which it can advance. It is an effective weapon of controlling credit in the country. The main aim of central bank is to stabilized money market in the country for this purpose this bank adopts quantitative controls.