Question

Define or Explain the following concepts.
Bank Rate.

Answer 1

Bank rate is the rate charged on the loans offered by the Central bank to the commercial banks without any collateral. Bank rate is a quantitative credit control measure under the monetary policy of the government as it controls the overall supply of the money in the economy. During inflation, bank rate is increased to reduce the total money supply in the economy by reducing the amount of credit by the commercial banks and during deflation, bank rate is decreased to increase the total money supply in the economy by increasing the amount of credit by the commercial banks.