---
title: "Bank Rate: RBI's Long-Term Lending Tool | Model Diplomat"
description: "Bank Rate is the rate at which the RBI lends long-term to banks under Section 49 of the RBI Act, 1934. See how it differs from the repo rate and MSF."
url: "https://modeldiplomat.com/learn/glossary/bank-rate"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Bank Rate is the rate at which a central bank lends long-term funds to commercial banks against eligible securities, serving as a penal and signalling instrument.
- What is the difference between the Bank Rate and the repo rate?
- Why is the Bank Rate aligned with the MSF rate in India?
- Where does the RBI's authority to fix the Bank Rate come from?
- Is the Bank Rate still an active monetary policy tool?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In February 2023, when the RBI's Monetary Policy Committee raised the repo rate to 6.50%, the accompanying resolution restated the Bank Rate at 6.75%, mirroring the Marginal Standing Facility rate.

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