Question : The rate at which RBI gives short-term loans to commercial banks is called:
Option 1: repo rate
Option 2: reverse repo rate
Option 3: bank rate
Option 4: cash reserve rate
Correct Answer: repo rate
Solution : The correct option is the repo rate .
The repo rate is the interest rate at which the Reserve Bank of India (RBI) offers short-term loans to commercial banks. The phrase repo means a repurchase agreement. It is a tool for monetary policy that central banks employ to manage liquidity and regulate interest rates in the market.
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