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Question
Bank rate is the rate at which:
Options
Commercial banks purchase government securities from the central bank.
Commercial banks can take loans from the central bank for a short term.
Short-term loans are given by commercial banks.
Commercial bank take loans from the public.
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Solution
Short-term loans are given by commercial banks.
Explanation:
The bank rate is the rate at which the central bank lends money to commercial banks on a short-term basis. Changes in the bank rate can affect the cost of borrowing for commercial banks, which in turn influences the interest rates they give their customers.
RELATED QUESTIONS
Define bank rate.
Which of the following is a selective/qualitative method of credit control.
The rate of which commercial banks borrow from the Central Bank is the:
Define qualitative credit control policy of the RBI.
Explain how credit rationing helps to control credit in an economy.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
Observe the relationship of the first pair of words and complete the second pair.
Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank :
During inflation, the central bank usually:
Define the term Statutory Liquidity Ratio.
State the impact of an increase in Cash Reserve Ratio on loanable funds.
Differentiate between quantitative and qualitative methods of credit control.
Briefly explain the following credit control method adopted by the Central Bank.
Publicity
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
Who controls the credit supply in an economy?
Identify the following Credit Control measures undertaken by the Central Bank during inflation.
The Central Bank increases the rate at which it lends to the Commercial Bank.
What is meant by Legal Reserve Ratio?
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
