Nominal Interest Rate is the stated rate of interest on a loan or investment without adjusting for inflation.
The Nominal Interest Rate is the headline rate quoted by banks or financial institutions. It does not reflect the real return or cost, because it ignores inflation.
To understand actual purchasing power, investors compare it with the real interest rate, which adjusts for inflation.
Interest rate policies in India are influenced by the Reserve Bank of India.
👉 Real Interest Rate ≈ Nominal Interest Rate – Inflation Rate
"If a bank offers 8% interest and inflation is 5%: 👉 Real Interest Rate ≈ 3%"