Bank rate is the interest rate charged by the central bank on loans to commercial banks. The bank rate fixed by the central bank influences the whole nation's economy. The bank rate affects commercial banks' interest rate charged on loans to consumers.
Bank rate regulates the nation’s economic balance to a certain extent. The Central bank will reduce bank rate when the economic growth is slow. When the bank rate is low, commercial banks will avail more funds from central bank. Then consumers are provided with more loan facilities. On the other hand, when the economic growth is high, central bank will raise the bank rate.