The lowering of bank rate by the Reserve Bank of India leads to more liquidity in the market. This is because the bank rate is the rate at which the central bank lends money to commercial banks. When the bank rate is lowered, it becomes cheaper for commercial banks to borrow funds from the central bank. This, in turn, encourages banks to borrow more money from the central bank, resulting in an increase in liquidity in the market.

Explanation:
What is the bank rate?
The bank rate is the rate at which the central bank lends money to commercial banks. It is one of the key monetary policy tools used by the Reserve Bank of India to control the supply of money and credit in the economy.

Effect of lowering bank rate
When the Reserve Bank of India lowers the bank rate, it signals that the central bank is willing to lend money to commercial banks at a lower cost. This encourages commercial banks to borrow more money from the central bank, as it becomes cheaper for them to do so.

Increased borrowing by commercial banks
The lower bank rate incentivizes commercial banks to borrow more funds from the central bank. This increase in borrowing leads to an increase in the liquidity of the banks. With more funds available, the commercial banks can then extend more loans and credit to individuals and businesses in the market.

More liquidity in the market
As commercial banks borrow more funds from the central bank, the overall liquidity in the market increases. This means that there is more money available for lending and investment purposes. This increased liquidity can stimulate economic activity as it facilitates easier access to credit for individuals and businesses.

Mobilization of more deposits by commercial banks
With the lower bank rate, commercial banks are also likely to mobilize more deposits from individuals and businesses. This is because the lower interest rates make it less attractive for people to save their money in banks, leading them to invest or spend it instead. As a result, commercial banks can mobilize more deposits, further increasing liquidity in the market.

In conclusion, the lowering of the bank rate by the Reserve Bank of India leads to more liquidity in the market. This is because it encourages commercial banks to borrow more funds from the central bank, thereby increasing the overall liquidity available for lending and investment purposes.