When RBI grants loan to commercial banks and charges interest on it, it is called :
Bank rate
The bank rate is defined in Section 49 of the RBI Act, 1934 as the standard rate at which the RBI is prepared to buy or rediscount bills of exchange or other commercial paper eligible for purchase. In practice it is the rate the RBI charges on loans and advances it gives to commercial banks; it is a long-term lending rate and does not involve a sale-and-repurchase of securities.
The repo rate is the rate at which the RBI provides short-term liquidity to banks against the sale of government securities with an agreement to repurchase them; the reverse repo rate is the rate at which the RBI absorbs funds from banks, i.e. banks lend to the RBI. A 'sweep stack rate, basic rate' is not a policy rate of the RBI at all.
So the interest charged by the RBI when it lends to commercial banks as a lender of last resort is the bank rate.
Hence, the answer is Bank rate.
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Which of the following is not the function of Reserve Bank of India?
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II. RBI maintains a current account of State Governments for keeping their cash balances.
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Which of the following functions of Reserve Bank of India are correct?
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