Which is the minimum lending rate decided by RBI which shall be adopted by all Public-Sector Banks?

a. Bank rate

b. Base rate

c. Overnight rate

d. None of the above

ANSWER: Base rate

Explanation:

Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers.

Base rate is decided to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers.

It is also known as prior probabilities.