Discussion
Which among the following is incorrect among Moral Suasion:
Answer: D
Correct answer: None of These
All three statements about moral suasion are correct, so none is incorrect. Under moral suasion the RBI persuades rather than compels: it may request banks not to lend for unproductive purposes, on the grounds that such credit adds to inflationary pressure without adding to productive capacity or economic development.
The instrument's character is that it carries no statutory force - it rests on the RBI's authority and on the banks' interest in maintaining a good relationship with their regulator. It is classified as a qualitative or selective control rather than a quantitative one.
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