UPSC CSE Prelims
Question 77
An increase in the Bank Rate generally indicates that the
View correct answer and explanation
Correct answer: D
Correct Option: D
Explanation: A Bank Rate increase makes central-bank financing more expensive and signals an attempt to restrain credit growth and inflation.
Option-wise Analysis:
A: Incorrect - Wrong: higher Bank Rate generally puts upward, not downward, pressure on borrowing rates.
B: Incorrect - Wrong: RBI can still lend; it is changing the applicable rate, not ending all lending.
C: Incorrect - Wrong: easy money policy usually involves lower policy rates.
D: Correct - Correct: raising Bank Rate is a contractionary or tight-money signal.