Question : The rate at which the RBI borrows from commercial banks is called:
Option 1: CRR
Option 2: SLR
Option 3: Repo rate
Option 4: Reverse repo rate
Correct Answer: Reverse repo rate
Solution : The correct answer is (d) Reverse repo rate.
The reverse repo rate is the rate at which the central bank (such as the Reserve Bank of India) borrows money from commercial banks. It is the opposite of the repo rate. While the repo rate is the rate at which the central bank lends money to commercial banks, the reverse repo rate is the rate at which the central bank borrows money from commercial banks.
The reverse repo rate is used by the central bank to absorb excess liquidity from the banking system. When the central bank increases the reverse repo rate, it incentivizes commercial banks to lend more funds to the central bank, as it offers them a higher interest rate on their surplus funds. This reduces the liquidity in the banking system and helps control inflationary pressures.
The reverse repo rate is an important tool for the central bank to regulate liquidity, manage interest rates, and influence the overall economic conditions.
Question : The rate at which the RBI lends to commercial banks is called:
Question : What is the meaning of reverse repo rate?
Option 1: The rate at which RBI borrows money from foreign banks.
Option 2: The rate at which RBI borrows money from commercial banks.
Option 3: The rate at which commercial banks borrow money from RBI.
Option 4: The rate at which commercial banks borrow money from foreign banks.
Question : ___________ is the rate at which the central bank borrows money from commercial banks.
Option 1: Repo rate
Option 2: Reverse repo rate
Option 3: Cash reserve ratio (CRR)
Option 4: Statutory liquidity ratio (SLR)
Question : The interest rate at which the RBI borrows money from banks is called:
Option 1: Reverse Repo Rate
Option 2: Repo Rate
Option 3: Bank Rate
Option 4: Savings Rate
Question : The bank rate is the rate at which:
Option 1: RBI borrows from commercial banks
Option 2: RBI lends to commercial banks
Option 3: Commercial banks lend to customers
Option 4: Commercial banks borrow from RBI
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