The Commercial Banks function to grant loan depends upon the value of security being mortgaged by the borrower so banks keep a margin, which is the difference between the market value of security and loan value. Raising the marginal requirement reduces the maximum amount a borrower can borrow from the Commercial Banks. In this way margin requirements helps in controlling credit creation. For example, a Commercial Bank grants loan of ₹80,000 against the security of ₹1,00,000. So margin is calculated as ₹1,00,000−₹80,000 =₹20,000. When the Central Bank decides to control the flow of credit, then margin requirement of loan is raised.