Bank Rate

The Bank Rate has been defined in the Reserve Bank of India Act, 1934 as the ‘standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under this act.


Increase in Bank Rate increases the cost of borrowing by commercial banks which results into the reduction in credit volume to the banks and hence declines the supply of money. Increase in the bank rate is the symbol of tightening of RBI monetary policy.



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Updated: December 19, 2017 — 8:45 am

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