Bank Rate is decided by which of the Agencies?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The bank rate is decided by the Reserve Bank of India. Although the rate fluctuates, this does not imply that a defined schedule has already been established. The state of the economy at any time determines how frequently repo rates are adjusted. A country’s central bank sets the interest rate. This is often carried out every three months to maintain the country’s currency rates and limit inflation.

Agency Deciding Bank Rate

The Reserve Bank of India sets the bank rate. The fact that the pace changes does not mean that a set schedule has already been created. The frequency of repo rate adjustmentsdepends on the status of the economy at any given period. The interest rate is determined by the central bank of a nation, which also controls the banking sector and the amount of money in circulation.

This is frequently done every three months to keep the nation’s currency rates stable and inflation under control. A change in the bank rate has a ripple effect on a nation’s economy, affecting every sector of the economy. A country’s economy is affected by a bank rate change in a cascade of ways that affect all areas of the economy.

  • The Reserve Bank of India (RBI) lends money to commercial banks at the bank rate at which it does not hold any collateral.
  • No repurchase agreement will be drafted or agreed to without any collateral.
  • The RBI permits short-term loans with collateral.
  • Repo Rate is the term for this. The RBI sets Indian banks’ interest rates.
  • Due to its capacity to control liquidity, it is typically greater than a Repo Rate.

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