Bank rate

From Wikipedia, the free encyclopedia

Jump to: navigation, search
For the company, see Bankrate.

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank
charges on the loans and advances that it extends to commercial banks and other financial
intermediaries. Changes in the bank rate are often used by central banks to control the money
supply. Bank rate websites such as BanxQuote provide greater efficiency and transparency to the
market creating a centralized gateway for easy side-by-side review and comparison, as well as a
centralized transaction platform that reduces the time and effort required by in-market consumers
who would otherwise need to regularly call and check numerous individual bank and mortgage
websites for interest rate quotes and updates. .

Contents
[hide]

 1 Difference between Bank Rate and Repo Rate

 2 Regional Bank Rate
 3 United Kingdom
 4 India
 5 Canada
 6 References

[edit] Difference between Bank Rate and Repo Rate

While repo rate is a short-term measure, i.e. applicable to short-term loans and used for
controlling the amount of money in the market, bank rate is a long-term measure and is governed
by the long-term monetary policies of the governing bank concerned.

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges
on the loans and advances that it extends to commercial banks and other financial intermediaries.
Changes in the bank rate are often used by central banks to control the Money supply
current bank rate at which RBI lends to Banks is 6%.

Repo rate: Whenever the banks have any shortage of funds they can borrow it from the central
bank. Repo rate is the rate at which our banks borrow currency from the central bank. A
reduction in the repo rate will help banks to get Money at a cheaper rate. When the repo rate
increases borrowing from the central bank becomes more expensive.

The Reverse repo rate is the rate at which the central bank borrows from the banks, while the
Repo rate is the rate at which the banks borrow from the central bank.

A bank rate is the interest rate that is charged by a country’s central or federal bank on loans
and advances to control money supply in the economy and the banking sector. This is typically
done on a quarterly basis to control inflation and stabilize the country’s exchange rates. A
fluctuation in bank rates triggers a ripple-effect as it impacts every sphere of a country’s
economy. For instance, the prices in stock markets tend to react to interest rate changes. A
change in bank rates affects customers as it influences prime interest rates for personal loans.
Types of Bank Rates

Here are the different types of monetary instruments on which financial institutions offer the
following bank rates:

Savings account bank rate: Modest rates are charged on funds that are deposited in the savings
accounts. However, investors have high flexibility in withdrawing the deposits.

Certificates of deposit (CD) bank rate: These offer comparatively high interest rates compared
to savings accounts. Bank rates on CDs are determined by the term period of a deposit and the
current economic situation. The longer the term of a CD, the higher will be the bank interest rate.

Money-market funds bank rate: The interest rate on money-market funds is relatively low. As
most of the money market accounts are privately insured, it is a secure method of investment.
Deposits in a money market account generate interest through short-term investments.

[edit] Regional Bank Rate

Though influenced heavily by the none Interest rate, all bank rates will vary regionally. It pays to
compare interest rates on a regional or state-wide level.