|Consider the following:|
|1. RBI changes bank rate very frequently for monetary operation.|
|2. Any revision in Bank rate by RBI is a signal to banks to revise deposit rates as well as prime lending rate. Which of these statements is/are correct?|
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: B
Solution :[b] A bank rate is the interest rate at which a nation's central bank lends money to domestic banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired. The bank rate can also refer to the interest rate which banks charge customers on loans.
You need to login to perform this action.
You will be redirected in 3 sec