Why has the Repo rate taken precedence over the bank rate as a short term?
But an increase in bank rate makes credit directly dearer for the banks and as it is long term in nature so banks increase their interest rate on lending, which reduces plannned aggregate investment in the economy and thus hampers growth directly.Repo rate increase might also affect investment but the impact is not that severe and direct as bank rate.As the central bank has to maintain a balance between the growth and inflation rate, so it is trying to control inflation by taking other monetary measures that does not affect the growth of the economy directly.
