{"id":91087,"date":"2025-06-01T10:45:50","date_gmt":"2025-06-01T10:45:50","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91087"},"modified":"2025-06-01T10:45:50","modified_gmt":"2025-06-01T10:45:50","slug":"an-increase-in-the-bank-rate-generally-indicates-that-the","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/an-increase-in-the-bank-rate-generally-indicates-that-the\/","title":{"rendered":"An increase in the Bank Rate generally indicates that the"},"content":{"rendered":"

An increase in the Bank Rate generally indicates that the<\/p>\n

[amp_mcq option1=”market rate of interest is likely to fall” option2=”Central Bank is no longer making loans to commercial banks” option3=”Central Bank is following an easy money policy” option4=”Central Bank is following a tight money policy” correct=”option4″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2013<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nAn increase in the Bank Rate indicates that the Central Bank (RBI in India) is following a tight money policy.
\n<\/section>\n
\nThe 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.
\n<\/section>\n
\nIn modern monetary policy, the repo rate (the rate at which banks borrow from RBI for short term against government securities) has largely replaced the Bank Rate as the primary tool for signalling monetary policy stance and managing liquidity. However, the principle remains the same: raising these policy rates signals monetary tightening, while lowering them signals easing.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

An increase in the Bank Rate generally indicates that the [amp_mcq option1=”market rate of interest is likely to fall” option2=”Central Bank is no longer making loans to commercial banks” option3=”Central Bank is following an easy money policy” option4=”Central Bank is following a tight money policy” correct=”option4″] This question was previously asked in UPSC IAS – … <\/p>\n

Detailed SolutionAn increase in the Bank Rate generally indicates that the<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1467,1120,1190],"class_list":["post-91087","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1467","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nAn increase in the Bank Rate generally indicates that the<\/title>\n<meta name=\"description\" content=\"An increase in the Bank Rate indicates that the Central Bank (RBI in India) is following a tight money policy. 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.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/an-increase-in-the-bank-rate-generally-indicates-that-the\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"An increase in the Bank Rate generally indicates that the\" \/>\n<meta property=\"og:description\" content=\"An increase in the Bank Rate indicates that the Central Bank (RBI in India) is following a tight money policy. 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.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/an-increase-in-the-bank-rate-generally-indicates-that-the\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T10:45:50+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"An increase in the Bank Rate generally indicates that the","description":"An increase in the Bank Rate indicates that the Central Bank (RBI in India) is following a tight money policy. 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