What is the meaning of bank rate?

In simple terms, bank rate is the long-term lending rate from the central bank to other banks. If RBI increases the bank rate, borrowing becomes costlier, which reduces money supply in the economy.

The bank rate is the rate at which a country’s central bank (in India, the Reserve Bank of India) lends money to commercial banks without any security. It’s a tool used to control inflation and credit availability.