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
Option 4: Repo Rate
Correct Answer: Reverse Repo Rate
Solution : The correct option is the Reverse Repo Rate
The reverse repo rate is the interest rate at which the Reserve Bank of India (RBI) absorbs liquidity from banks by lending money to them against the collateral of eligible government securities. The Liquidity Adjustment Facility (LAF) is a monetary policy tool used by the RBI to manage liquidity in the banking system, and it includes both repo and reverse repo operations.
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