The lowering of Bank Rate by the Reserve Bank of India leads to:

The answer is A) More liquidity in the market. Bank Rate is the rate at which the RBI lends to commercial banks against eligible bills and securities. When the RBI lowers it, borrowing from the central bank becomes cheaper, so banks are more willing and able to borrow and lend. Reserves in the banking system rise and credit expands, which is what liquidity means in this context.

Why the others are wrong:

• B is the opposite of the effect. A rate hike tightens liquidity; a cut loosens it.
• C is wrong because any change in the cost of central bank funds changes the liquidity position, even if the effect is gradual.
• D is wrong because deposit mobilisation depends mainly on the deposit rates banks offer and on customer savings behaviour, not on the Bank Rate directly.

Core concept: the transmission of monetary policy through the cost of central bank credit. For Mains, this links to the RBI's role in inflation control and growth, and to how the monetary policy framework has changed. Note that since the Liquidity Adjustment Facility was introduced, the repo rate is the operative policy rate, and the Bank Rate now mainly serves as a reference rate for the Marginal Standing Facility.

Trap: aspirants pick D because the question mentions banks, or they confuse the Bank Rate with the CRR or SLR, which work through different channels.