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    The central bank reduces its bank rate to encourage commercial banks to expand credit during times of need, such as the current COVID-19 situation. By lowering the bank rate, it becomes less costly for commercial banks to borrow from the central bank than to keep large reserves. This motivates commercial banks to lend more, increasing the money supply and stimulating the economy. A lower bank rate helps address credit needs during an economic crisis like the pandemic.

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    The central bank reduces its bank rate to encourage commercial banks to expand credit during times of need, such as the current COVID-19 situation. By lowering the bank rate, it becomes less costly for commercial banks to borrow from the central bank than to keep large reserves. This motivates commercial banks to lend more, increasing the money supply and stimulating the economy. A lower bank rate helps address credit needs during an economic crisis like the pandemic.

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    5 views1 page

    Case

    Uploaded by

    bir shoq gul
    The central bank reduces its bank rate to encourage commercial banks to expand credit during times of need, such as the current COVID-19 situation. By lowering the bank rate, it becomes less costly for commercial banks to borrow from the central bank than to keep large reserves. This motivates commercial banks to lend more, increasing the money supply and stimulating the economy. A lower bank rate helps address credit needs during an economic crisis like the pandemic.

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    of 1

    Case-study 1 Case-study 2

    Q.1 Read the following case study and answer the Case Study Reserve Bank of India (RBI) is the central bank
    following: When credit is to be expanded the central bank of the country. RBI is a statutory body. It is responsible for
    reduces the bank rate. By this central bank encourages the the printing of currency notes and managing the supply of
    commercial banks to keep small proportion of their deposits money in the Indian economy. It plays multi-facet role by
    as reserve since borrowing from central bank is now less executing multiple functions such as overseeing monetary
    costly than before. This measure is also helpful in present policy, issuing currency, managing foreign exchange,
    COVID-19 situation also. working as a bank of government and as banker of
    scheduled commercial banks, among others. It also works
    Q-1 What is bank rate & who decides it? for overall economic growth of the country.
    Q-2 By reducing in bank rate what is the main purpose of Q1. Define a central bank.
    Central bank.
    Q2. Who issues the one-rupee notes and coins in the
    Q-3 How decrease in bank rate helpful in COVID-19 country?
    situation? 
    Q3. RBI acts as the banker to the central government and
    commercial banks act as banker 1 to the state
    governments. (T/F)

    Q4. When commercial banks fail to meet their financial


    requirements from other sources, 1 the central bank
    provides them funds through discounting of approved
    securities and due to this central bank is said to be the
    _________________.

    Q5. Where is headquarter of RBI? 

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