Explain the effect of bank rate on credit creation by Commercial Banks

1.	Explain the effect of bank rate on credit creation by Commercial Banks?
Answer» EXPLANATION: Increase in the bank rate will make the loans more EXPENSIVE for the commercial banks; thereby pressurizing the banks to increase the rate of lending. The increased lending capacity of banks as well as increased public demand of credit will AUTOMATICALLY LEAD to a rise in the VOLUME of the credit.

Explain the effect of bank rate on credit creation by Commercial Banks?

Answer»

Increase in the bank rate will make the loans more EXPENSIVE for the commercial banks; thereby pressurizing the banks to increase the rate of lending.

The increased lending capacity of banks as well as increased public demand of credit will AUTOMATICALLY LEAD to a rise in the VOLUME of the credit.

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Explain the effect of bank rate on credit creation by Commercial Banks?

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