The lowering of Bank Rate by the Reserve Bank of India leads to

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Q: 88 (IAS/2011)
The lowering of Bank Rate by the Reserve Bank of India leads to

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,212,45,212,20,9,16

keywords: 

{'bank rate': [0, 1, 1, 2], 'less liquidity': [0, 0, 0, 1], 'more liquidity': [0, 0, 0, 1], 'reserve bank': [1, 0, 3, 4], 'more deposits': [0, 0, 0, 1], 'commercial banks': [0, 0, 1, 1], 'liquidity': [0, 0, 0, 4], 'market': [0, 0, 1, 0], 'lowering': [0, 0, 0, 1], 'india': [8, 1, 7, 13]}

The lowering of Bank Rate by the Reserve Bank of India leads to more liquidity in the market.

Explanation:

Bank Rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks. When the RBI lowers the Bank Rate, it becomes cheaper for commercial banks to borrow money from the central bank. As a result, the banks have more funds available to lend to their customers, leading to increased liquidity in the market.

Increased liquidity means that there is more money available for borrowing and lending, which can lead to an increase in economic activity. This can result in increased investment, consumption, and production, which can boost economic growth.

On the other hand, if the RBI raises the Bank Rate, it becomes more expensive for commercial banks to borrow money from the central bank, leading to a decrease in liquidity in the market.

Therefore, the correct answer is "More liquidity in the market."

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