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Bank Rate and Repo rate: Understanding Monetary Policy (for UPSC CSE)
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This lesson continues the discussion on monetary policy and covers the very important concepts of bank rate and repo rate. It starts with the definition of Bank rate, its features and scope, why it is also called discount rate, it goes on to cover the objectives of the bank rate. It then covers the repo rate - its definition, features and objective. Finally it ends with important concluding remarks.

Ayussh Sanghi is teaching live on Unacademy Plus

Ayussh Sanghi
Passionate Educator - CSE / Other Govt Exams [Peep into my Unacademy Plus Courses & experience awesome learning.]

Unacademy user
Thnks alot sir. I had a querry plz solve it. Sir itni saari ek din ki news collect ho jati npr, internet searching n all other sources sir unko yaad kaise rakhu sab kuch mind se slip ho jata hai phir do din baad lgta hai arey ye kb padhi thi news mtlb bhut confusion hota hai. Me kaise padhu ya notes bnau ki sb yaad rahe. Even me apko july onwards follow krri hu notes bhi bne hai but mene sb kuch ek he copy me likh lia ab kholti hu to kachra lgta hai kuch smgh nhi ata or exam ke sir 6 months bache hai? What shud i do? And pib n editorial course kb start hoga sir?
Sanyam Kapila
2 years ago
Watch this new course on Vocabulary from The Hindu Newspaper.
Parminder singh
2 years ago
Arrange notes topic wise And take out time for revision 1-2 hours every day It will help u
Aanchal verma
2 years ago
Thnks but the prblm is this wo copy hai arrange nhi ho payenge. Btw thnks
Parminder singh
2 years ago
Leave them as it is Make use of spiral note book Ya fir loose sheets Btw urs welcome
Aanchal verma
2 years ago
yup mene october se aise he notez banaye hai
Parminder singh
2 years ago
sir, why bank rate don't have collaterals ??
sir pls explain y repo rate is always more than reverse repo rate?
a year ago
so that it will always be beneficial and profitable for RBI
SIr, do we keep collaterals in Bank Rates? What are the impacts of monetary committee on monetary policy framing. Is there any change?
Kannav Mittal
2 years ago
Bank don't keep collateral in bank rate with RBI.
Unacademy upsc
a year ago
but why bank rate don't have collaterals?
Ashutosh Aswale
a year ago
but banks keep collateral during lending the money at repo rate! i think that's the major difference between bank rate and repo rate!

  2. ABOUT ME >Passionate about Teaching >Taught at most reputed Civil Services Institutes >CA, Lawyer >Hit "Contribute to Ayussh" Follow me on: AyusshSanghi

  3. Bank Rate * It refers to the official interest rate at which RBI provides loans to the banking system. It includes: * commercial /cooperative banks, * development banks etc. * Such loans are given out by: * direct lending or * by rediscounting (buying back) the bills of commercial banks and treasury bills.

  4. Bank Rate * Hence, bank rate is also known as discount rate. * Bank rate is used as a signal by the RBI to the commercial banks on RBI's thinking of what the interest rates should be.

  5. Objective of Bank Rate When RBI increases the bank rate, the cost of borrowing for banks rises k This credit volume gets reduced leading to decline in * This credit volume gets redtuced leading to decline in supply of money Thus, increase in Bank rate reflects tightening of RBI monetary policy

  6. Repo Rate Repo rate, or repurchase rate, is the rate ak * This is done by RBI buying government bonds from ak banks with an agreement to sell them back at a fixed rate.

  7. Objective of Repo Kate * Objective is to inject liquidity in the system. In case RBI wants to make it expensive for banks to borrow money, it increases the repo rate. Similarly, if banks want to make it cheaper for banks to borrow money, it reduces the repo rate.

  8. Difference between Bank Kate and Repo Rate k Often seems Bank Rate and Repo Rate similar because in both of them RBI is lending to the banks. KS. * But Repo R ak to short-term loans and used for controlling the amount of money in the market.

  9. Difference between Bank Kate and Repo Rate Bank Rate is a long-term measure and is governed by the long-term monetary policies of the RBI

  10. Conclusion sk charges on the loans and advances that it extends to: commercial banks and other financial intermediaries. RBI uses this tool to control the money supply.