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Question : What is the meaning of reverse repo rate?

Option 1: The rate at which RBI borrows money from foreign banks.

Option 2: The rate at which RBI borrows money from commercial banks.

Option 3: The rate at which commercial banks borrow money from RBI.

Option 4: The rate at which commercial banks borrow money from foreign banks.


Team Careers360 14th Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: The rate at which RBI borrows money from commercial banks.


Solution : The correct option is The rate at which RBI borrows money from commercial banks.

Through the sale of securities and a promise to buy them back at a later time, the Reserve Bank of India borrows funds from commercial banks under a reverse repo agreement. Central banks employ it as a tool to remove excess liquidity from the banking sector.

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