What is Bank Rate?

The rate of interest payable by a commercial bank if it borrows money from the RBI in case of a shortage of reserves is the Bank Rate. Borrowing from the RBI at Bank rate needs no collateral.

Scheduled Commercial Banks only borrow for the short term at the Bank Rate from the RBI.

How does the RBI use Bank rate?

A low (or high) bank rate encourages banks to keep smaller (or greater) proportion of their deposits as reserves, since borrowing from RBI is now less (or more) costly than before. As a result banks use a greater (or smaller) proportion of their resources for giving out loans to borrowers or investors, thereby enhancing (or depressing) the multiplier process via assisting (or resisting) secondary money creation.

How is it different from Repo Rate?

The Bank Rate is applied to those funds that the Banks borrow from the RBI without providing any collateral. Hence, the Bank rate is always going to be higher than the Repo rate.

The Repo rate is applied when the Banks borrow after having provided a collateral i.e a security. Hence, the Repo rate is generally lower than the Bank Rate.

What is the current Bank Rate?

For the current bank rate, you can check Bank rate under Policy rates on this page: https://rbi.org.in/