Bank Rate implies the rate of interest
Reviewed by Dalvoy
UPSC Civil Services preparation
- Apaid by the Reserve Bank of India on the Deposits of Commercial Banks
- Bcharged by Banks on loans and advances
- Cpayable on Bonds
- Dat which the Reserve Bank of India discounts the Bills of ExchangeCorrect
Explanation
The Bank Rate is the official interest rate at which the Reserve Bank of India is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under the RBI Act. In simpler terms, it is the rate at which the central bank provides long term loans to commercial banks. While Option A refers to the Reverse Repo Rate and Option B refers to the lending rates of commercial banks, Option D accurately describes the technical definition of the Bank Rate as an instrument of monetary policy used by the RBI to control credit in the economy.
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