Question:medium

The standard rate at which RBI is prepared to buy or rediscount bills of exchange of commercial banks is called:

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Remember: Bank Rate = Long-term lending rate of RBI; Repo Rate = Short-term borrowing rate with collateral.
Updated On: Jan 14, 2026
  • SLR
  • Bank Rate
  • CRR
  • Repo Rate
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The Correct Option is B

Solution and Explanation

The Bank Rate signifies the interest rate at which the Reserve Bank of India (RBI) provides funds to commercial banks. It also serves as the benchmark rate for the RBI's transactions involving the purchase or rediscount of bills of exchange and other eligible commercial papers from banks. Commercial banks can access funds from the RBI through rediscounting these bills when experiencing a liquidity deficit. Adjustments to the bank rate directly affect the lending rates of commercial banks by altering their borrowing costs. It is important to distinguish that SLR (Statutory Liquidity Ratio) and CRR (Cash Reserve Ratio) are regulatory reserve requirements, not lending rates. Unlike the Repo Rate, which facilitates short-term borrowing against collateral, the Bank Rate pertains to long-term lending extended by the RBI without requiring any securities. Consequently, option (B) Bank Rate is the accurate choice.
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