Bank Rate Definition
The Bank rate is a fundamental concept in monetary policy. It represents a specific interest rate set by a country's central bank.
Central Bank Lending Rate
The bank rate is the rate at which the central bank lends money to commercial banks. This is typically done to influence the overall money supply and credit conditions within the economy. Commercial banks borrow from the central bank for various reasons, including meeting reserve requirements or managing short-term liquidity shortages.
Key Distinction
It is important to distinguish the bank rate from other rates:
- It is not the rate at which commercial banks lend to the central bank.
- It is not primarily the rate at which the government borrows from the central bank.
The core function of the bank rate is facilitating lending from the central bank to commercial banks, thereby influencing the broader financial system.
Similar Questions
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- After amalgamation of 26 Regional Rural Banks (RRBs) in fourth phase of amalgamation, as notified by Department of Financial Services (DFS) in 2025, how many RRBs will be left in the country?
- Which of the following banks became State Bank of India after nationalisation in the year 1955 and has the largest number of branches in the world?
- How many major banks were nationalised by the government in 1969?
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- Which one of the following is the largest commercial bank in India?
- Dear money refers to money that is hard to obtain due to:
'Indradhanush 2.0' is associated with:
The purchasing power of a currency relative to another at current exchange rates and prices is ________.
- In which of the following years was the monetary policy framework moved towards flexible inflation targeting and a six member Monetary Policy Committee (MPC) constituted for setting the policy rate?
Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
