Economics • Banking & FinanceEasy
What does 'Repo Rate' stand for in monetary policy operations?
A. The rate at which the central bank lends short-term money to commercial banks against government securities.✓ Correct Answer
B. The interest rate paid by commercial banks on long-term corporate deposits.
C. The rate charged by commercial banks to retail home loan borrowers.
D. The interest rate earned by the central bank on foreign currency holdings.
💡 Solution & Explanation
The repo rate is the benchmark interest rate at which the Reserve Bank of India extends short-term liquidity support to commercial banks against government securities. When commercial banks park their excess funds with the central bank instead, the reverse repo rate applies. Changes in the repo rate serve as a primary monetary policy tool for managing domestic inflation and liquidity.
More Economics Banking & Finance questions
- Which of the following entities is authorized to issue 'Masala Bonds' in overseas capital markets?
- Examine the composition of money supply aggregates in India as defined by the Reserve Bank of India. Which…
- What does the term 'CASA Ratio' signify for a commercial bank?
- What specific financial inclusion challenge do commercial banks encounter while expanding branch networks in…
- What does the 'Net Stable Funding Ratio (NSFR)' under Basel III banking standards require financial…