Multiple choice

Bank rate refers to

  1. The rate of interest changed on bank to bank transaction

  2. The rate of interest provided to its consumer

  3. The maximum rate that banks can pay for deposits

  4. The rate at which banks rediscount bills with
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D Correct answer
Explanation

Bank rate is the rate at which the central bank (RBI in India) rediscounts bills of exchange and other commercial paper for commercial banks. It is a monetary policy tool used to control money supply and inflation, not directly related to consumer rates or deposit rates.

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