Answer to Question #272034 in Economics for unknown

Question

(a) The Bank Rakyat had several large withdrawals and its reserves have fallen below its required reserves. Other banks are unwilling to lend it money, so it has turned to the emergency lending division of the Bank Negara Malaysia for an overnight loan. What is the name of the interest rate this bank will be charged for an overnight loan from the Bank Negara?

Answer 1

The overnight rate is the interest rate at which a depository institution (generally banks) lends or borrows funds with another depository institution in the overnight market. In many countries, the overnight rate is the interest rate the central bank sets to target monetary policy. In most circumstances, the overnight rate is the lowest available interest rate, and as such, it is only available to the most creditworthy institutions.