Chart of Bank Rate
Current Bank Rate
The current Bank Rate is 4.25%. The Bank Rate last witnessed a change in its level on May 22, 2020 when it declined by 0.40% from its previous level of 4.65%.
As of today, i.e. on January 16, 2021, the Policy Rates which include Repo Rate stood at 4.00%, Reverse Repo Rate at 3.35%, Marginal Standing Facility (MSF) Rate at 4.25% and Bank Rate at 4.25%. The Reserve Ratios which include Cash Reserve Ratio (CRR) stood at 3.00% and the Statutory Liquidity Ratio (SLR) at 18.00%, according to data of Major Monetary Policy Rates and Reserve Requirements released by the Reserve Bank of India.
Bank Rate in India
Section 49 of Reserve Bank of India Act, 1934 defines Bank Rate as the standard rate at which RBI is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act. In simple terms, Bank Rate is a discount rate at which the commercial banks and the financial institutions borrows loan from the central bank.
Bank rate was used as a Monetary Policy Key Rate through which RBI controlled the liquidity and inflation and which directly affected the Commercial Banks Lending Rates. But with the introduction of Liquidity Adjustment Facility (LAF), Bank rate is now not used by RBI for the monetary management.
Bank Rate is now aligned with Marginal Standing Facility (MSF) and hence the movement of MSF rates results in change in the Bank Rate. Nowadays, Bank Rate is more a benchmark rate which is only used in calculating penalty on default in the maintenance of cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).
The Federal Reserve has a responsibility to ensure the safety and soundness of financial institutions and to contain systemic risks in financial markets.
~ Bernie Sanders