Repo rate is the interest rate at which:
The commercial banks borrow from the RBI
The correct answer is Option 1: The commercial banks borrow from the RBI.
Key Facts About Repo Rate:
Definition: Repo rate stands for Repurchase Option rate. It is the benchmark interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks in India against government securities when banks face a shortage of funds.
Monetary Policy Tool: The RBI uses the repo rate as a crucial tool to regulate liquidity, inflation, and money supply in the economy.
To Control Inflation: The RBI increases the repo rate. This makes borrowing expensive for commercial banks, leading to higher interest rates for public loans, which reduces spending and lowers inflation.
To Boost Growth: The RBI decreases the repo rate. This makes loans cheaper, encouraging businesses and consumers to borrow and spend more.
Context of Other Options:
Option 2 (Commercial banks borrow from other commercial banks): This describes the Interbank Call Money Market rate, which handles short-term, overnight funding requirements between banks.
Option 3 (Commercial banks deposit money to the RBI): This interest rate is known as the Reverse Repo Rate (or managed via tools like the Standing Deposit Facility). It is the rate at which the RBI borrows excess money from commercial banks.
Option 4 (Common people deposit money to the RBI): The general public cannot open bank accounts or deposit money directly with the RBI, as it functions strictly as the central banking regulator and the "Banker to Banks."
Important Questions from Economy
The Five Year Plan was first launched in
Which of the following was/were the feature(s) of Lenin’s New Economic Policy (NEP) for the Soviet Union?
1) Private retail trading was strictly forbidden
2) Private enterprise was strictly forbidden
3) Peasants were not allowed to sell their surplus
4) To secure liquid capital, concessions were allowed to foreign capitalists, but the State retained the option of purchasing the product of such concerns
Select the correct answer using the code given below:
Which one of the following was set as a target of average growth of GDP of India over the plan period 2012-2017 by the Approach Paper to the Twelfth Five year Plan?
In ________ economies, all productive resources are owned and controlled by the government.
Private ownership of the means of production is a feature of a _______ economy.
