The rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers is called the ______.
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Bank Rate
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."
- Bank rate is the rate charged on the loans offered by the Central bank to the commercial banks without any collateral.
- It is also considered the rate at which the central bank discounts the bills of the commercial banks.
- The bank rate is a quantitative credit control measure under the monetary policy of the government as it controls the overall supply of money in the economy.