Identify the rate at which RBI gives loans to the commercial Banks to influence money supply.

Bank rate

The RBI can influence money supply by changing the rate at which it gives loans to the commercial banks. This rate is called the Bank Rate in India. By increasing the bank rate, loans taken by commercial banks become more expensive; this reduces the reserves held by the commercial bank and hence decreases money supply. A fall in the bank rate can increase the money supply.

Repo Rate: When the central bank buys the security, this agreement of purchase also has specification about date and price of resale of this security, this type of agreement is called a repurchase agreement or repo. The interest rate at which the money is lent in this way is called the repo rate. Similarly, instead of outright sale of securities the central bank may sell the securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called a reverse repurchase agreement or reverse repo. The rate at which the money is withdrawn in this manner is called the reverse repo rate.

Note: The answer to this question can be both Bank Rate and Repo Rate. However, the out of the two the most appropriate answer is bank rate. The question is directly from the NCERT book which states that the rate at which it gives loans to the commercial banks is known as Bank Rate.