Multiple choice

Bank-rate is the rate of which

  1. A commercial bank borrows loans from some other commercial bank

  2. The central bank borrows loans from the Government

  3. The commercial bank gives loans to the public

  4. The central bank re-discounts the commercial bills brought to it by the commercial banks
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D Correct answer
Explanation

Bank rate is the rate at which a central bank rediscounts first-class securities like bills of exchange and commercial paper presented by commercial banks. It's a monetary policy tool used to control money supply and credit conditions in the economy. When central banks raise this rate, borrowing becomes more expensive, reducing liquidity.

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