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Distinguish between Quantitative Credit Control and Qualitative Credit Control.

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Quantitative Credit Control:

1. This method aims at controlling credit by expanding or contracting the volume of credit in the banking system.

2. The important quantitative measures to control credit are: 

(1) Bank Rate 

(2) Open Market Operation 

(3) Varying Cash Reserve ratio.

3. During inflation quantitative measures adopt the strategy of contracting the volume of credit so as to reduce money supply. During inflation such methods are applied to encourage expansion of credit and expand money supply. 

4. They are macro economic in nature and influence the whole economy.

Qualitative Credit Control:

1. It aims at controlling credit by checking the purpose or use of the credit. 

2. Selective control measures include the following:

(1) Changing the market. 

(2) Regulation of consumer credit 

(3) Issue of directives

(4) Rationing of credit 

(5) Moral suasion.

3. The main strategy of selective credit control measures is to ensure that credit money does not reach undesirable and non – productive channels.

4. They are micro in nature and do not influence the whole economy.

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