11) When and why do commercial banks implement “credit rationing”?
11) When and why do commercial banks implement “credit rationing”?
Homework Answers
Answer : Credit rationing is the control or limitation on credit. Sometimes the demand for loan become higher than the supply of loan. As a result, some people does not get loan or some people get less loan than their demand. Again, sometimes loan supply become higher than the loan demand. As a result, the loanable market face surplus situation. When Commercial Banks face those situations then to overcome from those situations Commercial Banks use "credit rationing". The aim of Commercial Banks to implement "credit rationing" is to limit the Commercial Banks' total granted amount of loan and advances.
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