UPSC Prelims 1995 · General Studies
Question 55: Economy and Social Development
Which one of the following is not an instrument of selective credit control in India?
AnswerThe answer is (d).
Selective credit controls direct bank credit to or away from particular uses: regulating consumer credit, rationing of credit, and margin requirements on loans against specified goods or securities. Variable reserve ratios (CRR and SLR) change the whole volume of credit, so they are general or quantitative controls, not selective. Remember: bank rate, open market operations and reserve ratios are general; margins, rationing and consumer credit rules are selective.
Why each option is right or wrong
- (a) Regulating consumer credit targets a particular use of credit, so it is selective.
- (b) Rationing of credit limits credit to particular borrowers or uses and is treated as selective.
- (c) Margin requirements on loans against particular goods are a classic selective control.
- (d) Right: variable reserve ratios (CRR, SLR) are general controls on the total volume of credit.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1995, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.