Budget 2022: Bank rate kept low to aid recovery

/ 1 min read

When RBI raises the rate, the bank's borrowing costs go up, which reduces money supply and checks inflation.

Sanjay Rawat
Credits: Sanjay Rawat

The bank rate, which central bank changes for lending to commercial banks, is sharply down since FY12, when it was 9.5%. This allows banks and industry to access money at lower rates. When RBI raises the rate, the bank's borrowing costs go up, which reduces money supply and checks inflation.

ADVERTISEMENT
Sign up for Fortune India's ad-free experience
Enjoy uninterrupted access to premium content and insights.