Bank Rate:

The rate at which the Reserve Bank of India (RBI) lends money to commercial banks is known as the Bank Rate. It is also known as the discount rate, as it is the rate at which the RBI rediscounts the bills of commercial banks.

Features of Bank Rate:

- Bank Rate is a tool used by the RBI to control credit growth in the economy.
- It is the rate at which the RBI lends money to commercial banks for a long-term period, usually for more than 90 days.
- The Bank Rate is higher than the Repo Rate, which is the rate at which the RBI lends money to commercial banks for a short-term period.
- The Bank Rate is also used to determine the interest rates of various loans and advances offered by commercial banks.
- The Bank Rate is an important tool used by the RBI for open market operations.

Significance of Bank Rate:

- The Bank Rate is used by the RBI to control the supply of money in the economy.
- The Bank Rate affects the lending rates of commercial banks, which in turn affects the borrowing and investment decisions of individuals and businesses.
- A higher Bank Rate leads to higher borrowing costs, which discourages borrowing and reduces credit growth in the economy. This helps to control inflation.
- A lower Bank Rate leads to lower borrowing costs, which encourages borrowing and increases credit growth in the economy. This helps to stimulate economic growth.

Conclusion:

In conclusion, the Bank Rate is an important tool used by the RBI to control credit growth in the economy. It is the rate at which the RBI lends money to commercial banks for a long-term period, usually for more than 90 days. The Bank Rate affects the lending rates of commercial banks, which in turn affects the borrowing and investment decisions of individuals and businesses.