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
Correct Answer: Repo rate
Solution : The correct option is the Repo rate .
The repo rate is when the central bank lends money to commercial banks against government securities. This is short-term borrowing in which banks sell government securities to the RBI. All this is done through an agreement that says the g-sec is repurchased.
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