What is Rediscount?

Rediscount is a term used in connection with the dynamics of a certain type of transaction that occurs between the main bank in the country and other qualified auxiliary banks. Usually, when banks try to get loans from the central bank, they can do so with a certain level of discount that will be determined at the discretion of the central bank with the intention of using such a tool to influence the economy. The Rediscount rate concerns another reduction in the interest rate, which is charged to auxiliary banks, a factor that increases the aggregated interest rate lower than the Rediscount was applied to the loan interest.

The connection between this Rediscount and the intention of the central bank is that such a bank is usually carried by the desire to influence the economy. Because the central banks have Mandéde manipulation of the economy by using certain policies and tactics, usually usedThe Rediscount process as one of the means to achieve such stabilization factors. The process of decision to exercise policies is based on the outcome of the analysis of the economic. If the economic analysis leads to the determination of the general slowdown of this same, the central bank will introduce monetary policies intended to increase expenditure and general consumption as a means of reviving the economy.

An example of such tactics will be to reduce the interest rate at which commercial banks in the economy can obtain loans from the bank using Rediscount. In a sense, the use of rediscount is intended to serve as a kind of event that causes the transmission of the central bank to the wider economy. In this sense, banks are a kind of Condait tube for the transfer of monetary policy launched by the central bank. To this end, the Bank will then reduce the interest that they charge their customers for the credit and the issue of loans. This affects consumers by supporting them more to spend more as a result of an easier approach to funds toe entered their consumption.