Question : Statement 1: Repo rate is the rate at which the central bank lends money to commercial banks.
Statement 2: Reverse repo rate is the rate at which banks borrow money from each other.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer: Statement 1 is true, but statement 2 is false.
Solution : The correct answer is (b) Statement 1 is true, but statement 2 is false.
Statement 1 is true. The repo rate is the rate at which the central bank (such as the Reserve Bank of India) lends money to commercial banks in exchange for securities like government bonds. It is a tool used by central banks to control monetary policy.
Statement 2 is false. The reverse repo rate is the rate at which commercial banks (or other financial institutions) lend money to the central bank in exchange for securities. It is the opposite of the repo rate and is used to manage liquidity in the banking system.
Question : Statement 1: Repo rate is the rate at which the central bank lends money to ommercial banks.
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