myz-vgb.ru A Business Encyclopedia

Moral Suasion

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 the general monetary policy of the central bank is called a moral suasion.

Moral suasion is applied in addition to the quantitative and other selected methods, especially in the situations where these methods prove to be less effective. The central bank relies heavily on this method where there are a large number of commercial banks, with a view to accomplishing the objectives. Also, the central bank can request or convince the commercial banks to not to advance additional credit to the public or finance the non-priority industrial sectors.

Under this method, the central bank writes letters or hold meetings with the commercial banks with an aim to persuading banks to act according to the directives regarding the money and credit matters of the central bank in the economic interest of the country as a whole.

The moral suasion develops a more psychological effect as the central bank makes an appeal to the bank’s nationalism spirit. Thus we can say that the moral suasion is a psychological phenomenon of controlling the credit in the economy. It is not subject to any law as it is purely informal and involves personal interaction between the central bank and the commercial banks.

The moral suasion is a more lenient method than other forms of selective credit control methods as it does not involve any punitive action or administration threat. Thus, it helps the central bank to gain the willing cooperation of the commercial banks. The moral suasion proves to be effective only when the central bank gets a full cooperation and respect for its directives from the commercial banks.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


what is the definition of hire purchasespearmans rank formulareinforcement theory of motivation pdfdefinition oligopolydefine stradlingdefine retailing in marketingmeaning of stable in hindideontology in business ethicsgraph of production functionpayback meaningmonopolistic competitive market structureexamples of psychoanalytic theorydefinition primalneft transactionsbi kiosk bankingdefensive tactics definitioncost assignment methodsmulti stage cluster samplinginduction and orientation in hrmprovident funds definitionpavlov theoriesclassical conditioning easy definitiontheory of scientific management by frederick taylorlockbox bank accountwhat is mkischaracteristics of a duopolyexploitative autocratic leadershipmanagement styles laissez fairescientific management theory by f w taylorshrm meaningdefinition of hrpppf meansconcept of business process reengineeringpromotional pricing definitioncyclical unemployment recessionexamples of oligopoly marketsources of long term finance advantages and disadvantagesdefine job enlargementlicensing and franchising definitionwhat is divestment strategymeaning of e retailingvroom theoryexamples of participative leadershipwhat are the components of a modern marketing information systemwhistleblowing definitiondeontology theory definitionsebi guidelineswhat is the meaning of dualityexplanation of elasticity of demanddelphi method definitionto outsource definitiondiminishing marginal utility explains whydefinition of marginal productrevenue turnover formulanational savings certificatemeaning of franchiseeforward contract hedgingadvertising elasticity of demand examplefactors that affect elasticity of demanddisadvantages of a narrow span of controlansoff marketingwhat is the difference between gnp and nnpcrm advantages and disadvantagesrestruction meaningwhat is the definition of conceptualizingspearmans correlation coefficientwhat is meant by linearitysystematic sampling in statisticsteleological theory and deontological theorysuperiors definitionaudit définitionmonopolistic compettiondefinition of recruitment and selection in hrmcross elasticity of demand for complementary goodsdelphi method of forecastingwhat is indifference curve analysis what are its propertiesmeaning of seasonal unemploymentrbi defination