Bank rate is the rate at which ____ lends money to ____.
Bank rate is the rate at which ____ lends money to ____.
(a) Central Bank, Commercial Banks
(b) Commercial Banks, Central Bank
(c) Central Government, Commercial Banks
(d) Central Bank, Central Government
Anurag Pathak Changed status to publish January 3, 2024
Ans – (a)
The bank rate is the rate at which the Central Bank lends money to Commercial Banks
Explanation:-
Bank Rate:- It is the interest rate at which the commercial banks can borrow from the central bank to meet their long-term needs.
It is also fixed by the central bank which also has the power to change it.
RBI uses Bank Rate to control credit. An increase in Bank rate increases the cost of borrowing from the central bank, which leads to an increase in lending rates by commercial banks.
It discourages borrowers from taking loans, which reduces the ability of commercial banks to create credit.
Anurag Pathak Changed status to publish January 3, 2024
