Credit control policy, accelerates sales of products or services through the extension of credit to potential customers or clients. Here are top 4 reasons for adopting Credit Control Policy and an explanation on how it boosts the Economy.
1. Boosts the Economy: It facilitates adequate volume of credit supply from banks to different sectors, this helps the businesses fuel their production output and ease of raising funds through debt financing gets controlled. Thus, potential outputs lead to economic development.
2. Ensures Price Stability: It helps in creating a balance between demand for money and supply for money by controlling inflation as well as deflation.
3. Planting a magnified development of the" Priority sector": It encourages the overall growth of the "priority sector" which are the sectors of the economy which is recognized by the government as "prioritized" depending upon their economic condition or government interest. These sectors broadly total to around 15 in number.
4. Lower chances of credit default: By controlling the CRR(Cash Reserve Ratio) & SLR(Statutory Liquidity ratio) rates, banks make judicious channelization of credit so that credit is not delivered for unfavourable purposes. Thus, it helps in reducing NPAs(Non-Performing Assets) & controls inflation.
