CA Foundation Exam > CA Foundation Questions > What is Bank Rate?a)The rate of interest char...
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What is Bank Rate?
- a)The rate of interest charged by public sector banks from the general public
- b)The rate of interest on housing loans
- c)The rate of interest on educational loans
- d)The rate at which the RBI discounts the bills of commercial banks
Correct answer is option 'D'. Can you explain this answer?
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What is Bank Rate?a)The rate of interest charged by public sector bank...
Understanding Bank Rate
The Bank Rate is a critical monetary policy tool used by central banks, such as the Reserve Bank of India (RBI), to regulate the economy. It plays a significant role in influencing interest rates in the banking system and ultimately affects economic activity.
Definition
- The Bank Rate is defined as the rate at which the RBI lends money to commercial banks against government securities.
- It is essentially the cost of borrowing funds from the central bank.
Significance of the Bank Rate
- Liquidity Management: The Bank Rate helps manage the liquidity in the banking system. A higher rate may discourage borrowing, while a lower rate encourages it.
- Inflation Control: By adjusting the Bank Rate, the RBI can influence inflation. An increase in the Bank Rate typically leads to higher interest rates in the economy, reducing spending and investment, which helps control inflation.
- Economic Growth: Conversely, lowering the Bank Rate can stimulate economic growth by making borrowing cheaper, thereby encouraging spending and investment.
Impact on Commercial Banks
- Commercial banks often adjust their own lending rates based on changes in the Bank Rate. This means that when the RBI changes the Bank Rate, it can have a cascading effect on various loan rates, including housing and educational loans.
Conclusion
In summary, the correct answer to the question regarding the Bank Rate is option 'D'. It is the rate at which the RBI discounts the bills of commercial banks, serving as an essential tool for monetary policy and economic regulation.
The Bank Rate is a critical monetary policy tool used by central banks, such as the Reserve Bank of India (RBI), to regulate the economy. It plays a significant role in influencing interest rates in the banking system and ultimately affects economic activity.
Definition
- The Bank Rate is defined as the rate at which the RBI lends money to commercial banks against government securities.
- It is essentially the cost of borrowing funds from the central bank.
Significance of the Bank Rate
- Liquidity Management: The Bank Rate helps manage the liquidity in the banking system. A higher rate may discourage borrowing, while a lower rate encourages it.
- Inflation Control: By adjusting the Bank Rate, the RBI can influence inflation. An increase in the Bank Rate typically leads to higher interest rates in the economy, reducing spending and investment, which helps control inflation.
- Economic Growth: Conversely, lowering the Bank Rate can stimulate economic growth by making borrowing cheaper, thereby encouraging spending and investment.
Impact on Commercial Banks
- Commercial banks often adjust their own lending rates based on changes in the Bank Rate. This means that when the RBI changes the Bank Rate, it can have a cascading effect on various loan rates, including housing and educational loans.
Conclusion
In summary, the correct answer to the question regarding the Bank Rate is option 'D'. It is the rate at which the RBI discounts the bills of commercial banks, serving as an essential tool for monetary policy and economic regulation.
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What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer?
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What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer?.
What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer?.
Solutions for What is Bank Rate?a)The rate of interest charged by public sector banks from the general publicb)The rate of interest on housing loansc)The rate of interest on educational loansd)The rate at which the RBI discounts the bills of commercial banksCorrect answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
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