Business Jargons A Business Encyclopedia

Definition: Moral Suasion refers to a method adopted by the central bank to persuade or convince the commercial banks to advance credit in accordance with the directives of the central bank in the economic interest of the country. Simply, the process in which the central bank requests or persuade the commercial banks to comply with…

Definition: The Lending Margin refers to the gap between the value of the property mortgaged, against which the loan is borrowed, and the actual amount advanced to the borrower. In the above definition, Margin denotes the collateral that the investor has to deposit with a bank so as to cover some or all the credit…

Definition: The Credit Rationing is a measure undertaken by the central bank to limit or deny the supply of credit based on the investor’s creditworthiness and an increased loan demand. In other words, a situation where the central bank denies credit to the borrowers who want funds and are willing to pay a higher interest…

Definition: The Statutory Liquidity Ratio (SLR) refers to the proportion of deposits the commercial bank is required to maintain with them in the form of liquid assets in addition to the cash reserve ratio. In the definition, the liquid assets are the assets readily convertible into cash, includes government bonds, or government approved securities, gold,…

Definition: The Cash Reserve Ratio refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the central bank. The objective of maintaining the cash reserve is to prevent the shortage of funds in meeting the demand by the depositor. The amount of reserve…

Definition: The Bank Rate also called as a Discount Rate is the rate at which the commercial bank rediscounts their bills of exchange from the central bank. As per the RBI Act, 1935 the bank rate is the standard rate at which the bank buy or rediscounts the bills of exchange and other commercial papers…

Definition: The Open Market Operations refers to the sale and purchase  of government securities and treasury bills by the central bank of the country with a view to regulate the supply of money in the economy. When the central bank wants to increase the money supply in the economy, it purchases the government securities, i.e.,…

Definition: The Monetary Policy is a process whereby the monetary authority, generally the central bank controls or regulate the money supply in the economy. The central bank uses several instruments of monetary policy, referred to as monetary variables at its discretion, to regulate the credit availability and liquidity (money supply) in a manner that controls…

Definition: The Monetary Policy is a programme of action undertaken by the central banks and other regulatory bodies to control and regulate the money supply to the public and a flow of credit, so as to ensure the stability in price and trust in the currency by targeting the inflation rate and the interest rate.…

Definition: The Monetary Policy is the plan of action undertaken by the monetary authority, especially the central banks, to regulate and control the demand for and supply of money to the public and the flow of credit so as to achieve the macroeconomic goals. The goals of the monetary policy are to control the money…