what is bank rate what are the effects of changes in bank rate
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When RBI increases bank rate, it is called 'dear money policy'. Money becomes costlier. RBI, does so, generally, during a period of inflation. Commercial banks are compelled to pay higher interest to the RBI which in turn prompts them to raise the interest rates on loans they offer to customers.
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The interest rate that is charged by a country's central or federal bank on loans and advances controls the money supply in the economy and the banking sector. ... A change in bank rates affects customers as it influences prime interest rates for personal loans.
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