An increase in the Bank Rate generally indicates that the
market rate of interest is likely to fall
Central Bank is no longer making loans to commercial banks
Central Bank is following an easy money policy
Central Bank is following a tight money policy
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC IAS – 2013
The Bank Rate is the rate at which the RBI is prepared to buy or rediscount bills of exchange or other commercial paper. Historically, it was the rate for long-term lending to banks. An increase in the Bank Rate makes borrowing from the central bank more expensive for commercial banks. This discourages banks from borrowing, limits credit creation, and tends to push up overall interest rates in the economy, thereby curbing inflation and economic activity. This is characteristic of a tight or dear money policy.