Central banks are known as "lenders of last resort" and effectively have a monopoly on lending currency to governments (and other banks).
Accordingly, while there is usually little risk involved (until recently - consider Greece, Japan, Ireland, etc.), there is a cost associated with increasing and decreasing liquidity in the form of exchange rate differences, import/export changes, cost to produce new currency, etc. Providing an interest rate allows part of the cost to be covered while indicating that money is not free.
Another consideration is the need to generate value. If there is no effective cost associated with borrowing, banks and governments would borrow as much as possible without regard to the eventual value that is created (or, most likely destroyed) as a result.
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PLR stands for Prime Lending Rate. This is the rate of interest at which banks grant loans to their best customers. Usually the PLR is comparable and has very little difference between banks. The PLR is usually very similar among banks
Banks let customers borrow the money that you keep in your savings account. Since they offer you an interest on the money you keep in your account and they need to make a profit from the loans they grant, they usually charge more interest. This interest is usually atleast 2-3% greater than the interest they offer on deposit accounts.
By paying out less in interest on deposits than it earns in interest on loans
The central bank does not directly determine the rates but the rates that it fixes like the Repo rate, Cash reserve ratio etc have a direct impact on the rates banks charge. When the repo rate is less and CRR is less then banks charge a lesser rate of interest and vice versa.
Federal Funds Rate
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They charge a much higher interest on loans than they pay on deposits.
PLR stands for Prime Lending Rate. This is the rate of interest at which banks grant loans to their best customers. Usually the PLR is comparable and has very little difference between banks. The PLR is usually very similar among banks
Banks let customers borrow the money that you keep in your savings account. Since they offer you an interest on the money you keep in your account and they need to make a profit from the loans they grant, they usually charge more interest. This interest is usually atleast 2-3% greater than the interest they offer on deposit accounts.
By paying out less in interest on deposits than it earns in interest on loans
They loan out the money in their customers' accounts and charge a higher interest rate on the loans.
Federal funds rate.
Banks let customers borrow the money that you keep in your savings account. Since they offer you an interest on the money you keep in your account and they need to make a profit from the loans they grant, they usually charge more interest. This interest is usually atleast 2-3% greater than the interest they offer on deposit accounts.
Federal Funds Rate