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.

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.

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.

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.

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.

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

Premium

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

The state-owned lender cut overnight and one-month MCLR by 25 bps to 6.90 per cent and 7 per cent

Updated On: 11 Jul 2022 | 11:07 PM IST

RBI policy highlights: Prioritising inflation over growth, says Das

RBI Monetary policy updates: As expected by market participants, RBI retained status quo on key interest rates. Governor Shaktikanta Das said. "Approach needs to cautious, but proactive". Stay tu

Updated On: 08 Apr 2022 | 2:01 PM IST

Parliament LIVE: UPA term was India's 'andhkaal', says FM Sitharaman

Rampant corruption, double digit inflation, policy paralysis were part of the dark age under Congress rule, says Sitharaman

Updated On: 10 Feb 2022 | 8:55 PM IST

RBI Monetary policy highlights: Lending rates unchanged amid Omicron scare

RBI Monetary policy LIVE updates: RBI announcement comes amid the threat surrounding Omicron coronavirus variant. Stay tuned for all the LIVE updates

Updated On: 08 Dec 2021 | 1:10 PM IST

Monetary policy highlights: Growth not at pre-pandemic level yet, says RBI

RBI Monetary policy highlights: RBI announcement comes against the backdrop of Covid-19 infections receding in recent days and the economy stablising. Stay tuned for all the LIVE updates

Updated On: 08 Oct 2021 | 1:13 PM IST

RBI MPC highlights: 2nd wave has moderated; expect demand to pick up

RBI Monetary policy highlights: Governor Shaktikanta Das announced decisions on key rates after the MPC concluded its three-day meeting today. Stay tuned for all the LIVE updates

Updated On: 04 Jun 2021 | 1:13 PM IST

RBI Monetary policy highlights: Inflation outlook uncertain, says RBI guv

RBI Monetary policy: RBI today decided to keep rates unchanged today amid rising inflation, lockdowns and Covid surge. Stay tuned for all the LIVE updates

Updated On: 07 Apr 2021 | 1:36 PM IST

Premium

RBI's monetary and Centre's fiscal policy are moving hand-in-glove

RBI has done exceptionally well in managing government's extended borrowing this year when fiscal deficit has shot-up to 9.5 per cent of GDP

Updated On: 05 Feb 2021 | 2:36 PM IST

Premium

RBI MPC highlights: Rates, stance unchanged, CRR to be restored, and more

Projection for CPI-based inflation revised to 5.2% for Q4 of FY21, for H1 of FY22 at 5% to 5.2%, and for Q3 of FY22 at 4.3%

Updated On: 05 Feb 2021 | 11:12 AM IST

LIVE: RBI says will undo damage inflicted on economy by Covid-19 in FY21-22

RBI Monetary policy LIVE updates: MPC voted unanimously to keep rates unchanged, said RBI governor Shaktikanta Das. Stay tuned for all the LIVE updates

Updated On: 05 Feb 2021 | 1:02 PM IST