Correct Answer: RBI lends to commercial banks

Solution : The correct answer is (b) RBI lends to commercial banks.

The bank rate is the rate at which the central bank, such as the Reserve Bank of India (RBI), lends money to commercial banks in the country. It is a tool used by the central bank to control the money supply and influence the overall interest rates in the economy. By changing the bank rate, the central bank can encourage or discourage borrowing by commercial banks and impact the availability of credit in the economy. Commercial banks, in turn, use these funds for their lending activities to customers.