Observation

Most candidates attempted the question but did the performance was not good.

The expected responses to the question include:

          (a) Ways through which a customer of a commercial bank could be granted credit

1. Overdraft
2. Loan
3. Leasing
4. Discounting bills of exchange
5. Debt factoring
6. Credit cards
7. Revolving credit
8. Consortium financing

         (b)  Ways through which the central bank controls the activities of commercial bank

1. Open market operation: The central bank buys and sells government    securities in the money market to influence the quantity of money in circulation. It sells when it wants to reduce the quantity and buys when it wants to increase    the quantity.
2. Special deposit: The central bank may call upon commercial banks to provide special deposits which may not be counted as part of their liquid resources with   the central bank. This reduces the liquid assets of the banks and forces them to restrict loans.
3. Bank rate: The central bank may increase the rate at which it discounts first class bills. This is to discourage borrowing as the cost of loans and overdrafts is increased. The reverse is the case of a decrease in the bank rate.
4. Liquidity/cash ratio: The central bank requires the commercial banks to  maintain a certain percentage of their total deposits in liquid form with it. An increase in the liquidity ratio forces the commercial banks to reduce loans to           maintain the stipulated liquidity ratio.
5. Moral suasion: The central bank may use an appeal to persuade the commercial banks to restructure their lending activities.
6. Directives: The central bank may issue special instructions to the commercial banks to restructure their lending and saving policies for example to convert short-term loans to medium and long-term loans.