Question : The rate at which the Reserve Bank of India lends to other commercial banks for the short term has been reduced. What is this rate called?
Option 1: Cash Reserve Rate
Option 2: Reverse Repo Rate
Option 3: Bank Rate
Option 4: Repo Rate
Correct Answer: Repo Rate
Solution : The correct option is the Repo Rate .
The rate at which the Reserve Bank of India (RBI) lends to other commercial banks for the short term is called the repo rate. When the RBI reduces the repo rate, it is typically done to stimulate economic activity by making it cheaper for commercial banks to borrow money from the central bank. This, in turn, can lead to lower interest rates on loans for consumers and businesses, which can encourage borrowing and spending. Conversely, if the RBI increases the repo rate, it aims to control inflation and cool down economic activity by making borrowing more expensive for banks and, ultimately, for consumers and businesses.
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