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Banking Term: Bank Rate

Feb 14, 2015 15:23 IST

    The Bank Rate (BR) has been defined in See 49 of RBI Act 1934 as the 'standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under this act'. The RBI uses its lending power to banks (a) to influence their credit allocation and (b) to develop a genuine bill market in India.

    Also, it is called an official interest rate at which the central bank rediscounts the approved bills held by a commercial bank. If the central bank wishes to control credit and inflation, it will increase the bank rate.

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