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 a tool for short-term measures. Any upward revision in Bank Rate is an indication that banks should also increase the deposit rates as well as the Prime Lending Rate. Any revision in the Bank rate indicates more or less 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 also tend to move down. Thus, it can said that in case bank rate is hiked, in all likelihood banks will hikes their own lending rates to ensure and they continue to make a profit.
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