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What does credit rationing mean?

Updated: 12/22/2022
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14y ago

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DEFINITION:A partial or complete limitation on borrowing, even whena borrower is willing to accept the terms of the lender is called credit rationing.

EXPLANATION:The Central Bank fixes a limit upon its re-discounting facilities for any particular bank. Rationing of credit is basically fixation by the central bank related to loans' upper limit i.e. maximum value.
This method is usually adopted by the central bank in cases of emergencies like natural hazards and in financial and economic crisis.
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