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
Correct Answer: Repo Rate
Solution : The correct answer is (a). Reverse Repo Rate.
The Reserve Bank of India (RBI) borrows money from banks through a process called the reverse repo rate. The reverse repo rate is the interest rate that the RBI pays to banks when it borrows money from them. The RBI uses the reverse repo rate to control the amount of money in circulation in the economy. When the RBI wants to increase the amount of money in circulation, it lowers the reverse repo rate, which encourages banks to lend money to businesses and consumers. When the RBI wants to decrease the amount of money in circulation, it raises the reverse repo rate, which discourages banks from lending money.
