MONETARY POLICY: QUALITATIVE TOOLS Flashcards
1
Q
What is the primary difference between quantitative and qualitative monetary policy tools?
A
Quantitative tools control the overall volume of credit; qualitative tools focus on credit distribution to specific sectors or society segments.
2
Q
Provide two key purposes of qualitative monetary policy tools.
A
- Targeted Sector Lending 2. Financial Inclusion
3
Q
Why are qualitative tools also known as “selective” or “direct” tools?
A
They target credit flow (selective) and directly influence bank lending decisions.
4
Q
What is Priority Sector Lending (PSL)?
A
PSL mandates banks to lend a percentage of their funds to priority sectors.
5
Q
What is Loan-to-Value Ratio (LTV)?
A
LTV determines the maximum loan amount based on the asset’s value, controlling risk.
