Multiple choice

Bank Rate is an RBI tool for short-term measures. State how its review affects commercial banking.

(a) An increase in Bank Rate leads to increase in deposit rates as well as Prime Lending Rate (PLR) on the part of commercial banking. (b) It reduces the EMI.

Which of the above statements is/are incorrect?

  1. (a) only

  2. (b) only

  3. Both (a) and (b)

  4. Neither (a) nor (b)

  5. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An upward revision in Bank Rate leads to increase in PLR, thereby adversely impacting the amount payable by borrowers on account of increase in lending rate. Hence, EMI increases.

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