Credit Control of Central Bank
Credit control is one of the vital tasks of the central bank. At present, a big portion of total money supply comes from credit. When this credit cannot be controlled it creates inflation or deflation and fluctuation in monetary value. In this purpose central bank has to step forward and control the circulation of credit.
By which means central bank tries to control the flow of credit in a country is called credit control. Commercial banks create credit for the determent of trade and commerce. Sometimes the flow of credit is so severe and sometimes it is so poor. Severances or poorness, both are harmful to the economy. Central bank tries to control the flow of credit and keep it in a boundary.
Credit control means to create such condition that compelled a loaner to repay the loan at just time and not to take a loan without necessary. By credit control banks also bound to give loan in certain sectors.
Hawtrey said – “The term credit control means the regulation and control of bank advances in optimum level.”
Credit control is essential for total economic development. If loan and advances are available in the market it creates inflation. Again it loan and advances is rare that creates a scarcity of necessary capital. Both situations are harmful to the economy. So credit control is necessary and vital role played by the central bank, which ensures the optimum level of the availability of loans and advances.