Question : Which among the following is correct about the Reverse Repo Rate?
Option 1: Reverse Repo Rate is a state in which the Value of Money is Falling and the Prices are rising, over a period of time.
Option 2: When a bank deposits its excess money in RBI then RBI provides some interest to that bank. This interest is known as the Reverse Repo Rate.
Option 3: When RBI provides a loan to the bank for a short-term between 1 to 90 days, RBI takes some interest from the bank which is termed as Reverse Repo Rate.
Option 4: When the money is borrowed or lent for more than a day up to 14 days it is called Reverse Repo Rate.
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Correct Answer: When a bank deposits its excess money in RBI then RBI provides some interest to that bank. This interest is known as the Reverse Repo Rate.
Solution : The correct answer is When a bank deposits its excess money in RBI then RBI provides some interest to that bank. This interest is known as the Reverse Repo Rate.
The interest rate at which the Indian central bank, the RBI, borrows money for a brief period from commercial banks is known as the reverse repo rate. Having access to quick cash when needed is beneficial to the central bank. The RBI provides high-interest rates in exchange for the funds provided by commercial banks.
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