Under which qualitative tool, RBI fixes maximum limit to loan and advances that can be made, above which the commercial banks cannot exceed?
Answer: A
Central Bank fixes credit amount to be granted. Credit is rationed by limiting the amount available for each commercial bank. This method controls even bill rediscounting. For certain purpose, upper limit of credit can be fixed and banks are told to stick to this limit. This can help in lowering banks credit exposure to unwanted sectors.