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Bank rate is for
  • a)
    Central banks by the central bank
  • b)
    Commercial banks by the government
  • c)
    Central bank by the commercial banks
  • d)
    Commercial banks by the central bank
Correct answer is option 'D'. Can you explain this answer?
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Bank rate is fora)Central banks by the central bankb)Commercial banks ...
The Reserve Bank of India (RBI) today gave freedom to banks in deciding their base rate. “Banks may choose any benchmark to arrive at the base rate for a specific tenor that may be disclosed transparently,” RBI said, as it released the final guidelines this evening.
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Bank rate is fora)Central banks by the central bankb)Commercial banks ...
D is correct as it is for loans taken by commercial bank from reserve Bank of India
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Bank rate is fora)Central banks by the central bankb)Commercial banks ...
Bank Rate is the rate at which a central bank lends money to commercial banks. It is an important tool used by central banks to control liquidity and credit conditions in the economy.

Central Bank's Role:
- The bank rate is set by the central bank to influence the cost of borrowing for commercial banks.
- Central banks use the bank rate as a monetary policy tool to control inflation, stimulate economic growth, or stabilize the currency.

Commercial Banks' Interaction:
- Commercial banks borrow from the central bank at the bank rate to meet their short-term liquidity needs.
- The bank rate directly impacts the interest rates that commercial banks charge on loans and offer on deposits to customers.

Relationship between Central Bank and Commercial Banks:
- The central bank sets the bank rate based on its assessment of economic conditions and its monetary policy objectives.
- Commercial banks adjust their lending rates based on changes in the bank rate set by the central bank.
- The bank rate serves as a signal to commercial banks about the prevailing monetary policy stance and helps guide their lending and borrowing decisions.
In conclusion, the bank rate is set by the central bank and impacts the borrowing and lending activities of commercial banks, playing a crucial role in the overall functioning of the financial system.
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Read the below case and answer the question that follow:On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. Under the terms of the moratorium, deposit withdrawals were capped at ₹50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.The bank’s loan book on March 31, 2014, was ₹55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at ₹ 2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner. YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues. - “What is YES Bank Crisis?” - Business StandardQ. What other role does the RBI play for Commercial Banks like YES Bank?

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Bank rate is fora)Central banks by the central bankb)Commercial banks by the governmentc)Central bank by the commercial banksd)Commercial banks by the central bankCorrect answer is option 'D'. Can you explain this answer?
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