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55. BANK RATE
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INTEREST
RATE
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1.
Meaning
It
is the rate at which central bank (RBI) lends money to commercial banks by
discounting bills of exchange.
2.
Purpose
It
acts as a guide line to the banks for fixing interest rates. If bank rate
increases, interest rate wills goes up, and vice-versa.
3.
Decided by
The
bank rate is decided by the Central Bank. In April 2010, the bank rate was
maintained at 6% p.a
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It is the rate at which the banks accept
deposits or lend money
Its purpose is to earn profit for the bank.
The different between lending interest rate and deposit interest is the
margin of profit for the banks.
It is decided by commercial banks, because
RBI has deregulated interest rates, except on saving deposits.
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BANK RATE INTEREST RATE
