Bank rate, also referred to as the discount rate, is the rate of interest

Interest rate

An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...

 which a central bank

Central bank

A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

 charges on the loans and advances that it extends to commercial bank

Commercial bank

After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...

s and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply

Money supply

In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...

.

Difference between bank rate and repo rate detail description

Whenever the banks have any shortage of funds they can borrow it from the central bank. Repo (Repurchase) rate is the rate at which the central bank lends shot-term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from the central bank becomes more expensive. It is more applicable when there is a liquidity crunch in the market.

The reverse repo rate is the rate at which the banks park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when there is surplus liquidity in the market.

Bank rate

The interest rate that is charged by a country’s central or federal bank on loans and advances to control money supply in the economy and the banking sector. This is typically done on a quarterly basis to control inflation and stabilize the country’s exchange rates. A fluctuation in bank rates triggers a ripple-effect as it impacts every sphere of a country’s economy. For instance, the prices in stock markets tend to react to interest rate changes. A change in bank rates affects customers as it influences prime interest rates for personal loans.

United Kingdom

In the UK bank rates are set by the Bank of England

Bank of England

The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

's Monetary Policy Committee

Monetary Policy Committee

The Monetary Policy Committee is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom . It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative...

. The key interest rate is called the official bank rate

Official bank rate

The official bank rate is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government's key interest rate for enacting monetary policy. It is more analogous to the US discount rate than to the Federal funds rate...

 which is the lowest rate at which the Bank acts as lender of last resort

Lender of last resort

A lender of last resort is an institution willing to extend credit when no one else will. The term refers especially to a reserve financial institution, most often the central bank of a country, intended to avoid bankruptcy of banks or other institutions deemed systemically important or 'too big to...

 to the money markets.

Canada

In Canada, the bank rate is defined as the upper limit of the overnight rate

Overnight rate

The overnight rate is generally the rate that large banks use to borrow and lend from one another on the overnight market. In some countries , the overnight rate may be the rate targeted by the central bank to influence monetary policy...

 band announced each month by the Bank of Canada

Bank of Canada

The Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada...

, (making it the target overnight rate + 0.25%).

BPLR (benchmark prime lending rate)

This is the rate at which a bank lends its money to its prime customers that is the minimum rate at which the bank gives loans to its prime customers