Question
Download Solution PDFRepo Rate is the rate at which
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is RBI lends money to commercial banks.
- Repo Rate is the rate at which RBI lends money to commercial banks.
Important Points
- Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks or financial institutions in India against government securities.
- Repo means Repurchase Agreement or Repurchase Option.
- Repo rate is classified under liquid adjustment facility which is a quantitative tool of monetary policy.
- Effect of Repo Rate on Economy:
- It helps in controlling inflation (one of the main instruments of RBI).
- Increase liquidity in the market.
- This is higher than the reverse repo rate (the rate at which RBI borrows money from banks).
- The current repo rate for the year 2021 is 4%.
Last updated on Mar 8, 2025
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