What is Bank Rate & How it is different from Repo Rate? | Indian Economy | Know all about it | UPSC

The bank rate, also known as the discount rate, is the rate of interest charged by a country's central bank when it lends funds to domestic banks. In the context of India, this central bank would be the Reserve Bank of India (RBI). Whenever a bank faces a shortage of funds, it can borrow from the RBI based on the monetary policy of the country.
The bank rate is an essential part of the economy section of the IAS exam. It is an interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks without any security or collateral. Unlike the Repo Rate, where short-term loans are given with collateral, the Bank Rate does not require any collateral. The RBI determines the Bank Rate in India, and it is generally higher than the Repo Rate due to its role in controlling liquidity.