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Bank Rate

Posted by Adminon September 4th, 2011 | 10 Comments

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What is Bank rate?

Bank Rate is the rate at which central bank of the country, in India it is the Reserve Bank of India (RBI),

allows finance/liquidity to commercial/scheduled banks within the territory of India. RBI uses Bank Rate as atool for short-term measures. Any upward revision in Bank Rate is an indication that banks should alsoincrease the deposit rates as well as the Prime Lending Rate. Any revision in the Bank rate indicates more orless interest on your deposits and also an increase or decrease in your EMI.

What is Bank Rate (Non Bankers Point of View) ?

This is the rate at which RBI lends money to other banks or financial institutions. If the bank rate goes up,long-term interest rates also tend to move up, and If the bank rate goes down, long-term interest rates alsotend to move down. Thus, it can said that in case bank rate is hiked, in all likelihood banks will hikes theirown lending rates to ensure and they continue to make a profit.

Present Bank Rate of RBI:875% [As of October 29, 2013]

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9 Comments

Artsays:September 8, 2011 at 5:13 pm

Major enthusiast of this website, quite a few your blog posts have definitely helped me out. Looking

towards upgrades!

Reply

1.

Sarojsays:November 30, 2011 at 8:40 am

Sir, Please tell me what exactly difference between Repo Rate and Bank Rate.

Mai hamesha hi in dono k bich confused rehta hu.

Reply

2.

Gayathri Kola826says:July 2, 2012 at 11:22 am

repo rate and bank rates are change in what time..?

Reply

Suvechchha Sahasays:July 2, 2012 at 11:35 am

according to RBIs decision.

Reply

3.

Pramodmpsays:July 6, 2012 at 4:16 pm

how it increases an d decreases the bank rate

Reply

4.


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Sk1987says:August 8, 2012 at 3:42 pm

shobha

Reply

5.

Rvkkurupsays:

March 8, 2013 at 10:38 pm

bank rate: 8.75%

Reply

6.

Rvkkurupsays:

March 8, 2013 at 10:42 pm

please tell what is the diff b/w BANK RATE & RIPO RTE

Reply

7.

Arunrvksays:March 8, 2013 at 10:48 pm

Repo or Repurchase rate is the rate at which banks borrow funds from the RBI to meet the gap betweenthe demand they are facing for money (loans) and how much they have on hand to lend.

If the RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate;similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.

Bank Rate

This is the rate at which RBI lends money to other banks (or financial institutions)

The bank rate signals the central banks long-term outlook on interest rates. If the bank rate moves up,

long-term interest rates also tend to move up, and vice-versa.

Banks make a profit by borrowing at a lower rate and lending the same funds at a higher rate ofinterest. If the RBI hikes the bank rate, the interest that a bank pays for borrowing money (banksborrow money either from each other or from the RBI) increases. It, in turn, hikes its own lending rates

to ensure it continues to make a profit.

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8.

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