Define ‘Bank Rate’ and its role in monetary policy. |.

Question
  • A. The interest rate on savings accounts
  • B. The rate at which banks lend to each other
  • C. The rate at which the central bank lends money to commercial banks
  • D. The rate at which the government borrows from banks
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correct Answer ( C )

The Bank Rate is the rate at which the central bank (in India, the RBI) lends money to commercial banks. It is a benchmark lending rate that influences other interest rates in the economy. Changes in the Bank Rate indicate the central bank’s stance on monetary policy . An increase in the Bank Rate signals a tightening of monetary policy , aiming to curb inflation by making borrowing more expensive , whereas a decrease signals a loosening of policy aimed to stimulate economic growth by making borrowing

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2025-03-24T19:40:49+00:00 2 views