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The bank rate identifies the interest rate which banks charge each other to make loans among themselves. The dominating rate, also called the discount rate, is usually set by a country's main bank. In the United States, this is the Federal Reserve Bank. The power of the bank rate is in its ability to control the money supply.
If the Federal Reserve sets a high rate of interest, this would mean that banks would be required to pay high interest rates on loans among themselves. The interest rates would be transferred to the public at higher points. High rates would mean money would be slow to flow among banks and among the public. In a sense it would imply slowing down the liquidity of the money supply.
By setting low rates, the Federal Reserve is, in effect, loosening the money supply. Banks would borrow more money from each other and this would place more money out into the general market. The flow of money would be liquid. More people would approach banks for loans and the business climate would overall improve.
In the U.S., the Federal Open Market Committee governs the Federal Reserve and consists of a seven-member Board of Governors appointed by the president and approved by the senate for 14-year terms. The president appoints one member as chairman. The committee also has presidents from each of the 12 Federal Reserve banks that cover the U.S. Only four members of these 12 have voting rights on a yearly rotating basis.
The president of the Federal Reserve Bank of New York sits on the board as the executive who is in charge of executing Federal Reserve policy.
The Fed pursues "monetary policy" by manipulating the bank rate to correct problems in the economy. Such policies should work to relieve an economy of distress from periods of recessions. The lower the rates, there should be likewise effects on mortgage rates throughout the country.
An alternative to using bank rates to affect economic change is for the government to adopt "Keynesian" economic policy of spending money.
What else can I help you with?
What is a bank rate?
A bank rate is the rate at which a central bank charges interest when it lends money to another bank.
What is a bank rate calculator used for?
A bank rate is the rate of interest that is charged or paid by a bank on a balance of debt or credit. A bank rate calculator allows an individual to enter an amount and a bank rate, and see the impact of that rate against the balance.
Difference between bank rate and PLR?
BANK RATE--- bank rate is rate which is used for lending or borrowing in call money market (One bank lends to or borrows from other banks for intra day) PLR-- Rate is benchmark rate for banks.
Define bank rate?
The rate of discount set by a central bank
What is bank rate?
wat s bank present rate of interest? 6%
Can you define base rate and portion in business terms?
bank base rate is rate at which bank give loan .
What is the definition of a bank rate?
A bank rate is a set charge that a bank charges for it's different offers the bank has set for the use of their services.
The rate at which the private banks lend to reserve bank of India is known as?
Bank Rate
What do you mean by bank rate?
Bank rate, also referred to as the discount rate, or it is the rate of interests 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.
What is a bank interest rate?
A Bank interest rate may refer to two things with respect to banking functions. a. Deposit Interest Rate - This is the rate the banks offer to their customers for depositing money with the bank b. Loan Interest Rate - This is the rate of interest banks charge the customers who wish to borrow money from them through loans. Both rates will differ from bank to bank
How does transfer pool rate works in a bank?
The bank uses a single rate to credit all of the bank branches. This rate is a weighted average cost of all funds for a banks.
Why has the Repo rate taken precedence over the bank rate as a short term interest rate?
Repo is like a repurchase agreement.The rate at which RBI sells securities to bank. But, bank rate is the rate by which RBI lends money to commercial banks. Annu Prakash
