Answer:
Bank Rate: Bank rate is the rate of interest at which the central bank lends funds to commercial banks. It is in a way, cost of borrowing.
In a situation of an inflationary pressure, central bank increases the bank rate. High bank rate forces the commercial bank to raise the rate of interest which makes credit dearer. As a result, demand for loans fall. Increase in bank rate by central bank adversely affects credit creation by commercial bank. A decrease in bank rate will have opposite effect.
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