The lowering of Bank Rate by the Reserve Bank of India leads to

  1. More liquidity in the market
  2. Less liquidity in the market
  3. No change in the liquidity in the market
  4. Mobilization of more deposits by commercial banks

Answer

Bank rate refers to the interest rate charged by central bank (RBI) on loans granted to commercial banks. When Bank Rate is lowered by RBI, bank's borrowing costs decreases (less interest) which in return, increases the supply of money in the market.

The correct option is A.

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