Question : The rate at which banks borrow from the RBI under the liquidity adjustment facility (LAF) is called:
Option 1: Bank rate
Option 2: Marginal Standing Facility (MSF) rate
Option 3: Reverse Repo Rate
Option 4: Repo Rate
Correct Answer: Repo Rate
Solution : The correct answer is (d) Repo Rate.
The Repo Rate is the rate at which banks borrow funds from the Reserve Bank of India (RBI) under the liquidity adjustment facility. It is a tool used by the RBI to inject liquidity into the banking system or absorb excess liquidity. When banks need short-term funds, they can borrow from the RBI by selling government securities with an agreement to repurchase them at a later date. The Repo Rate determines the cost of borrowing for banks, and changes in the Repo Rate affect the overall liquidity in the market.
Question : The ________ and _______ determine the corridor for the daily movement in the weighted average call money rate.
Option 1: Reverse repo rate, discount rate
Option 2: Marginal Standing Facility, reverse repo rate
Option 3: Liquidity adjustment facility, repo rate
Option 4: Bank rate, repo rate
Question : The interest rate at which the Reserve Bank of India provides overnight liquidity to banks is called ________.
Option 1: Reverse repo rate
Option 2: Marginal standing facility rate
Option 3: Repo rate
Option 4: Leverage rate
Question : _____ is the interest rate at which the Reserve Bank absorbs liquidity from banks against the collateral of eligible government securities under the LAF.
Option 1: SDF Rate
Option 2: Reverse Repo Rate
Option 3: Bank Rate
Question : ___________ is the interest rate at which banks can borrow overnight funds from the Reserve Bank of India (RBI).
Option 2: Repo rate
Option 3: Reverse repo rate
Option 4: Prime rate
Question : The interest rate at which the RBI borrows money from banks is called:
Option 1: Reverse Repo Rate
Option 2: Repo Rate
Option 4: Savings Rate
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