UPSC General Studies Solved Paper - General Studies-2011

  • question_answer
    The lowering of Bank Rate by the Reserve Bank of India leads to

    A)  more liquidity in the market  

    B)  less liquidity in the market

    C)  no change in the liquidity in the market

    D)  mobilisation of more deposits by Commercial Banks

    Correct Answer: A

    Solution :

    Exp. [a] Bank rate is the rate at which the RBI lends to the Commercial Banks. So, when the rate is reduced, banks borrow more and lend more to retail loan seekers thus infusing more liquidity, meaning higher off take of currency supply, in the system.

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