Question

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

• A. More liquidity in the market
• B. Less liquidity in the market
• C. No change in the liquidity in the market
• D. Mobilization of more deposits by commercial banks

Answer 1

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.