Multiple choice

The lowering of Bank Rate by the Reserve Bank of India leads to

  1. More liquidity in the market.

  2. Less liquidity in the market.

  3. No change in the liquidity in the market.

  4. Mobilization of more deposits by commercial banks.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply or liquidity. Liquidity of economy is inversely proportional to bank rate.

Keep practicing — related questions