GUJARAT-A Second Sardar Patel


government is determined by the government's budgetary policies, whereas "net bank credit to the commercial sector can be influenced by the Reserve Bank's credit policies" (paragraph 5). Paragraph 5 also lists the measures that the Reserve Bank can take: stepping up the cost of its lending to commercial banks; increasing liquidity requirements; and tightening selective credit controls through higher margin requirements, higher interest rates and ceilings on advances. Paragraphs 7 and 9 explain how, by raising the statutory liquidity requirements and the net liquidity ratios, "net bank credit to the commercial banks has been contained". Further, "the aim of policy has, been not merely to curtail the lendable resources of banks but also to minimise their recourse to the Reserve Bank". This is the subject of the next two paragraphs, which give only the figures of peaks, lows and variations of commercial banks' borrowings from the RBI.