What is Bank Rate?

Bank Rate

About Bank Rate

What is Bank Rate?

The minimum rate of interest, which a central bank charges (in India's case - Reserve Bank of India), while lending loans to domestic banks is called "Bank Rate". When a bank suffers fund deficiency, it can borrow money from RBI to continue services.
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When Bank Rate is increased by the central bank, a commercial bank’s borrowing costs hikes, which reduce the supply of money in the market.
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As RBI controls the money supply in the economy as well as in the banking sector, deciding the bank rate is usually done quarterly to control inflation and India's exchange rates as part of Monetary Policy action. There is no predetermined schedule per se. As of January 2021, the Bank Rate decided by the RBI is at 4.65 per cent.
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When a bank rate changes, it can influence every sphere of the Indian economy, whether in the stock market or while applying for a car loan.
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Bank Rate vs MCLR vs Repo Rate

Bank Rate is also known as “Discount Rate”, but it is sometimes confused with the Marginal Cost of Funds Based Lending Rate, commonly referred to as MCLR, which is the minimum interest rate below which financial institutions can't lend.
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Also, there is a slight difference between Bank Rate and Repo Rate. In Repo Rate, RBI lends money to the banks against securities for the short term only, usually when there is a liquidity crunch in the economy. The opposite of this is Reverse Repo Rate when banks park funds with the central bank due to surplus liquidity in the market.

Latest Updates on Bank Rate

Bank of Maharashtra bucks the trend, cuts MCLR by 20-35 basis points

3 min read Last Updated :Jul 11 2022 | 11:07 PM IST
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RBI policy highlights: Prioritising inflation over growth, says Das

1 min read Last Updated :Apr 08 2022 | 2:01 PM IST
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Parliament LIVE: UPA term was India's 'andhkaal', says FM Sitharaman

1 min read Last Updated :Feb 10 2022 | 8:55 PM IST
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RBI Monetary policy highlights: Lending rates unchanged amid Omicron scare

2 min read Last Updated :Dec 08 2021 | 1:10 PM IST
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Monetary policy highlights: Growth not at pre-pandemic level yet, says RBI

1 min read Last Updated :Oct 08 2021 | 1:13 PM IST
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RBI MPC highlights: 2nd wave has moderated; expect demand to pick up

1 min read Last Updated :Jun 04 2021 | 1:13 PM IST
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RBI Monetary policy highlights: Inflation outlook uncertain, says RBI guv

1 min read Last Updated :Apr 07 2021 | 1:36 PM IST
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RBI's monetary and Centre's fiscal policy are moving hand-in-glove

5 min read Last Updated :Feb 05 2021 | 2:36 PM IST
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RBI MPC highlights: Rates, stance unchanged, CRR to be restored, and more

3 min read Last Updated :Feb 05 2021 | 11:12 AM IST
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LIVE: RBI says will undo damage inflicted on economy by Covid-19 in FY21-22

2 min read Last Updated :Feb 05 2021 | 1:02 PM IST
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