ABSTRACT
Banks ration credit. The amount of credit granted varies with the perceived riskiness of the borrower. But at any given level of interest rates, there is, as Keynes put it, “an unsatisfied fringe of borrowers the size of which can be expanded or contracted, so that banks can influence the volume of investment… without any change in the level of bank rate”. Governments ration credit through changes in interested rates and sometimes through provisions for concessional credit. This article discussed the implications of the two kinds of credit rationing.
