Quantitative instruments broadly include the following:-

  1. Bank rate: it is the rate at which the central bank of a country is prepared to give credit to the commercial banks. Increase in bank rate increases the interest rates, and demand for credit gets On the other hand decrease in bank rate lowers the rate of interest and credit becomes cheap, and demand for credit expands.
  2. Open market operations: It refers to purchase and sale of securities in the open market by the central By selling the securities, central bank reduces the purchasing power of the system.
  3. Change in minimum reserve ratio: Minimum reserve ratio refers to the minimum percentage of a bank total deposit which is required to be kept with the central bank. All the banks have to keep with the central bank a certain percentage of their deposits in the form of cash reserve ratio.
  4. Change in liquidity ratio: Every bank is required to maintain a fixed percentage of its assets in the form of cash or other liquid assets called liquidity With a view to reducing the flow of credit, in the market central bank enhances the liquidity ratio. However in case of expansion of credit liquidity ratio is reduce.