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In India, the interest rate on saving accounts in all, the nationalized commercial banks is fixed by
1. Union Ministry of Finance
2. Union Finance Commission
3. Indian Bank's Associated
4. None of the above

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Correct Answer - Option 4 : None of the above

 The correct answer is None of the above.

 

  • The following rates are fixed by banks themselves and are not considered to be key policy rates
    • Base Rate
    • Interest Rates on Saving Accounts
    • Interest Rates on Current Accounts
  • RBI lends to the commercial banks through its discount window to help other banks meet depositors’ demands and reserve requirements.
  • The interest rate that the RBI charges the banks for this is called the Bank rate.
  • If the RBI wants to increase liquidity and money supply in the market, it will decrease the bank rate, and vice versa.
  • Bank Rate and Repo Rate are two rates on which RBI lends to other banks.
  • However, the key difference is that Repo Rate is the rate at which RBI lends to banks for short periods.
  • In Repo Rate, there is no direct lending but the lending is done by RBI buying government bonds from banks with an agreement to sell them back at a fixed rate.
  • Reverse repo rate is the rate of interest at which the RBI borrows funds from other banks in the short term.
  • Opposite to Repo, Reverse Repo is done by RBI selling government bonds to banks with the commitment to buy them back at a future date.

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