Bank rediscount and discount rate

The bank rediscount is a measure in which the Central Bank lends money to commercial banks, when they do not have sufficient resources.

The line of credit aims to maintain liquidity in the economy, while offering capital to banks with cash needs.

The measure is part of the monetary policy of the Central Bank (Bacen), which seeks to control the money supply in the economy.

Rediscount is also an operation that takes place between commercial banks. This is when one discounts the security acquired with another bank, recovering the money invested.

What is a discount rate?

The discount rate is the interest rate charged by the Central Bank when it lends funds to commercial banks.

It is also for her that monetary policy takes place. When the rate increases, it means that the Central Bank is signaling a policy of reducing the currency in circulation.

Otherwise, by reducing the discount rate, the Central Bank stimulates the demand for capital and the increase of money in circulation.

The current rediscount rate is equal to Selic + 6% per year for operations of one day, 4% per year for operations of up to 15 days or 2% per year for operations of up to 90 days.

Find out what the Selic rate is and what it is.

Difference between bank rediscount and mandatory deposit

Both operations are part of the monetary policy of the Central Bank. The difference is that the deposit withdraws money from the economy, while the discount is offered in the form of loans.

As a mandatory requirement, the Central Bank obliges banks to deposit part of the money deposited by customers in a reserve account.