The interest rate that a central bank pays to commercial banks for their deposits with it. It may also implies the interest rate at which a central bank lends money to domestic banks. Bank rates drive domestic banks’ credit extension and loan policies. It is the rate of interest set by a central bank in a country that represents the lowest rate at which it lends money to domestic banks. This rate affects the interest rates that domestic banks then charge to their customers.
Bank rate is also known as discount rate in American English, and the base rate in British English. It may also denote the cash rate.
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