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Bank Rate

What is Bank Rate? How does change in Bank Rate affect Inflation?

What is Bank Rate?

bank rate

The rate at which the Central Bank of the country (in India, RBI is the central bank) allows commercial banks to lend money to corporate or borrowers against their securities. In other words, we can say that the Bank rate is a rate at which banks borrow short term loan from RBI. The newer terms base rate and prime rate have replaced the term bank rate. As soon as the RBI hikes the bank rate, it will not only directly or indirectly affects the interest rates on deposits, bond issues and mortgages but also increase or decrease in EMI.

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