Bank rate means __________.
Official rate of interest charged by the Central bank of the country
Bank Rate Explained
The term "Bank rate" refers to a specific type of interest rate set by a nation's central bank.
Understanding the Bank Rate Definition
The Bank Rate is officially defined as the rate of interest which a country's central bank charges on loans and advances made to commercial banks. It's a crucial tool of monetary policy, influencing the cost of borrowing for banks and, consequently, for consumers and businesses.
Analysis of Options
- Interest rate charged by moneylenders: This is incorrect. While moneylenders charge interest, the Bank Rate is specifically associated with the central bank, not informal or private moneylenders.
- Interest rate charged by scheduled banks: This is incorrect. Scheduled banks charge various interest rates to their customers (like savings account rates or loan rates), but the Bank Rate is the rate at which the *central bank* lends to *these* banks.
- Rate of profit of banking institutions: This is incorrect. Profit is the financial gain a bank makes, which is different from the interest rate charged for borrowing funds from the central bank.
- Official rate of interest charged by the Central bank of the country: This is the correct definition. The Bank Rate signifies the cost at which commercial banks can borrow funds directly from the central monetary authority, impacting overall credit conditions in the economy.
Key Takeaway
Therefore, the Bank Rate is fundamentally linked to the central bank's role in managing the nation's monetary system.
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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?
