One of the key factors that provide impetus to strong growth is Interest Rates. How do interest rates contribute to the growth of economy, particularly when these are lowered down?begin{enumerate}item It gives corporations the opportunity to prepay high-cost debts and replace them with fresh funds raised at lower rates.item Banks use this opportunity to maximize profits on their treasury operations and these excess profits are used to clean their Balance Sheets by making higher provisions for NPAs or sticky loans.item The Govt also gets benefited as it can borrow funds from open market at low interest rates and bridge its fiscal deficit.end{enumerate}

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

One of the key factors that provide impetus to strong growth is Interest Rates. How do interest rates contribute to the growth of economy, particularly when these are lowered down?

A	Only 1
B	Only 2
C	Only 3
D	None of these

Explanation:

Detailed explanation-1: -Inflation and economic growth are the two primary reasons that can prompt the RBI to change the interest rates in India.

Detailed explanation-2: -Interest rate levels are a factor of the supply and demand of credit: an increase in the demand for money or credit will raise interest rates, while a decrease in the demand for credit will decrease them.

Detailed explanation-3: -Lenders consider your credit score, payment history and the current economic conditions when determining interest rates. Generally speaking, the higher your credit score, the less you can expect to pay in interest. But loan-specific factors such as repayment terms play a role too.

Detailed explanation-4: -Another potential result of higher interest rates: Businesses may pull back on borrowing and investing, which means consumers and businesses would start spending less and eventually bring demand back down to a level that’s commensurate with supply.

There is 1 question to complete.