The correct answer is: B. On which RBI rediscounts eligible exchanges.
Bank rate is the interest rate at which the central bank of a country lends money to commercial banks. It is a key tool that central banks use to control the money supply and interest rates in the economy.
When the central bank increases the bank rate, it makes it more expensive for commercial banks to borrow money. This discourages lending and helps to slow down the economy. When the central bank decreases the bank rate, it makes it cheaper for commercial banks to borrow money. This encourages lending and helps to stimulate the economy.
The bank rate is also used by the central bank to set the interest rates on other types of loans, such as mortgages and car loans. When the bank rate is high, other interest rates tend to be high as well. This makes it more expensive for businesses and consumers to borrow money, which can slow down the economy. When the bank rate is low, other interest rates tend to be low as well. This makes it cheaper for businesses and consumers to borrow money, which can stimulate the economy.
The bank rate is a powerful tool that can have a significant impact on the economy. However, it is important to note that the bank rate is just one of many tools that central banks use to manage the economy. Other tools include open market operations, reserve requirements, and moral suasion.
Here is a brief explanation of each option:
A. On which banks provide loan of debt. This is not the correct answer because the bank rate is the interest rate at which the central bank lends money to commercial banks, not the interest rate at which commercial banks lend money to their customers.
B. On which RBI rediscounts eligible exchanges. This is the correct answer because the bank rate is the interest rate at which the central bank lends money to commercial banks, and the central bank uses the bank rate to control the money supply and interest rates in the economy.
C. On which commercial banks take loans. This is not the correct answer because the bank rate is the interest rate at which the central bank lends money to commercial banks, not the interest rate at which commercial banks borrow money from each other.
D. On which development banks take loans. This is not the correct answer because the bank rate is the interest rate at which the central bank lends money to commercial banks, not the interest rate at which development banks borrow money from the central bank.