Official Bank Rate

The official bank interest rates affect different people in different ways. The people, who have taken any mortgage loan or automobile loan from bank, are negatively affected by a rise in official bank interest rates, whereas the people, who have deposited large amounts of money in banks, are positively affected by the rise, as they earn more money on interest.
By Official Bank Rate, here we actually mean the official bank interest rates. People of every country are largely concerned about these official bank interest rates as these rates affect them in many ways. When, the official bank interest rates increase, common man thinks that, money has become more expensive and when the official bank interest rates fall, he thinks that money has become cheaper.

But, this is a very generalized opinion. In reality, different people are affected by the official bank interest rate changes in different way.

The people, who have taken home loan, automobile loan or any personal loan from any bank, are concerned about the monthly amount that they have to pay to the banks in the procedure of repayment of the loan. If the rise in official bank interest rates, result in increase of their monthly payment, they get negatively affected.
On the contrary, the people who have deposited money in any bank are positively affected by a rise in the official bank interest rates. This is because, as a result of the increase in official bank interest rates, they earn more money, as their deposited money generate more interest.

Rise in official bank interest rates of a country, not only provoke the residents of that country to deposit more money in banks in order to earn more money; but also attract the foreign investors. If the foreign nationals find that, the particular country offers higher bank interest rates on deposits, then they try to place their money in that country in order to rake the advantage of the higher interest rates. This results in substantial inflow of capital, which offers higher interest rates.

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Last Updated on : 30th July 2013