Bank Rate is decided by the Reserve Bank of India.
Bank Rate refers to the interest rate at which the Reserve Bank lends loans to commercial banks in India. It is also known as the ‘Discount Rate’.Bank Rate caters to the financial requirements of domestic banks when they are in deficit.
RBI determines the Bank Rate in a bi-monthly monetary policy review. It is higher than the repo rate due to its long-term nature.
When the RBI increases the Bank Rate, the cost of borrowing from domestic banks increases, which in turn results in a decrease in the money supply in the market.
While charging a bank rate, no collateral is involved.
Section 49 of the Reserve Bank of India Act determines the Bank Rate.
MSF (Marginal Standing Facility), which is an overnight lending facility by the RBI, is linked to the bank rate.
As of 2022, the Bank Rate by RBI is 5.15%
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