• Bank Rate

    Bank rate is the rate at which the central bank provides money to the other financial institutions or banks. Bank rate enables the financial institutions (or banks) to borrow money from the central bank to fund any money need. Increase in bank rate leads to higher prime lending rate, the rate at which financial institutions lends money to other entities. So by increasing bank rate, the central bank can increase the interest rate in the market and reduce the demand. At the same time, as the lending becomes dearer, it reduces the lending by the financial institutions. Because of these two reasons bank rate hike is used to tame inflation.

    Post Tagged with

Leave a Reply

Your email address will not be published. Required fields are marked *