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Question

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> The lowering of Bank Rate by the Reserve Bank of India leads to


A
More liquidity in the market
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B
Less liquidity in the market
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C
No change in the liquidity in the market
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D

Mobilization of more deposits by commercial banks
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Solution

The correct option is A More liquidity in the market
<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> Bank rate refers to the rate at which RBI provides long-term borrowings to its clients. A decrease in bank rate will make borrowing from RBI cheap which will eventually lead to an increase in the money supply in the market i.e. higher liquidity.

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