‘Bank rate’ is the rate at which commercial banks

April 15, 2024 by rawan239

It is the rate at which the Reserve Bank of India lends money to commercial banks. The bank rate is used by the Reserve Bank of India to control the money supply in the economy. When the Reserve Bank of India increases the bank rate, it makes it more expensive for commercial banks to borrow money. This discourages commercial banks from lending money, which reduces the money supply in the economy. When the Reserve Bank of India decreases the bank rate, it makes it cheaper for commercial banks to borrow money. This encourages commercial banks to lend money, which increases the money supply in the economy.

Option B is incorrect because commercial banks lend money to customers, not borrow money from them. Option C is incorrect because commercial banks borrow money from customers, not from the Reserve Bank of India. Option D is incorrect because commercial banks do not lend money to the Reserve Bank of India.