Article

Bank Rate
September 10 , 2012

Bank rate is the rate at which the central bank RBI is prepared to lend to retail banks for the long term. It represents the rate at which RBI buys or re-discounts bills of exchange or other commercial papers from banks. Bank rate is used as reference rate by commercial banks for arriving at their base rate or prime lending rate. Thus change in bank rate affects banks' lending and deposit rate.

Bank rate is also the penal interest charged on banks for failing to meet with CRR and SLR requirements. Bank rate remained fixed at 6% from 2003 until RBI decided to align it with the rate on marginal standing facility (MSF) in March 2012.

 

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