BANKING GENERAL KNOWLEDGE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
the rate of interest charged by commercial banks on advances
|
|
|
the rate at which commercial banks discount bills of exchange for their clients
|
|
|
the rate of interest allowed by banks on the deposits
|
|
|
the standard rate at which the Reserve Bank of India is prepared to buy or rediscount bills of exchange other commercial paper eligible for purchase under the Reserve Bank of India Act, 1934
|
Detailed explanation-1: -Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as “the standard rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act."
Detailed explanation-2: -The Bank Rate acts as the penal rate charged on banks for shortfalls in meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio). The Bank Rate is published under Section 49 of the RBI Act, 1934.
Detailed explanation-3: -Thus, bank rate is also known as discount rate. Bank rate is used as a signal by the RBI to the commercial banks on RBI’s thinking of what the interest rates should be.
Detailed explanation-4: -The bank rate is the rate of interest which is charged by a central bank while lending loans to a commercial bank. In the event of a fund deficiency, a bank can borrow money from the central bank of a country. In India’s case that would be the Reserve Bank of India.
Detailed explanation-5: -Bank Rate is the rate at which central bank discounts the bills of commercial banks.