Which of the following is a selective credit instrument?

The correct answer is Credit rationing.

To understand why "Credit rationing" is the correct answer, we need to distinguish between the two main categories of monetary policy instruments used by central banks: qualitative (selective) instruments and quantitative (general) instruments.

1. Quantitative or General Instruments:
These instruments aim to regulate the total volume of credit and money supply in the entire economy. They apply to all sectors of the economy uniformly without distinguishing between them. Examples include:
- Bank Rate: The standard rate at which the central bank is prepared to buy or rediscount bills of exchange or other commercial paper eligible for purchase.
- Cash Reserve Ratio (CRR): The specified minimum fraction of the total deposits of customers that commercial banks must hold as reserves either in cash or as deposits with the central bank.
- Variable Reserve Ratio (or Statutory Liquidity Ratio): The ratio of liquid assets that commercial banks are required to maintain with themselves relative to their total demand and time liabilities.

2. Qualitative or Selective Instruments:
Unlike quantitative measures, selective credit control instruments are used to regulate and direct the flow of credit to specific sectors of the economy (such as agriculture, priority sectors, or speculative activities) rather than affecting the overall volume of credit. Examples include:
- Credit Rationing: A method where the central bank fixes a limit or quota for the credit available to commercial banks or directs commercial banks to limit credit to specific sectors or activities.
- Margin Requirements: Changing the difference between the value of securities offered for a loan and the loan amount granted.
- Moral Suasion: Persuasion and informal pressure exerted by the central bank on commercial banks to follow certain credit policies.

Among the given options, Variable reserve ratio, Bank rate, and CRR are quantitative tools designed to control the general volume of credit in the economy. Only Credit rationing is a qualitative or selective credit instrument because it limits or targets the availability of credit for specific sectors or purposes.