The Repo and Reserve Repo rates are resorted to by the RBI as a tool of
Liquidity Control
Repo is the rate at which the RBI lends short-term funds to banks against government securities; reverse repo is the rate at which it absorbs surplus funds from banks.
Both operate through the Liquidity Adjustment Facility (introduced in 2000) to inject or absorb liquidity daily and steer the overnight call rate. In June 2014 the repo rate was 8.00% and the reverse repo 7.00%, with the MSF at 9.00%.
Repo and reverse repo also affect the cost and availability of credit, which is why some textbooks list them among general credit control measures. Their immediate purpose, though, is to add or remove liquidity in the banking system; any effect on credit follows from that. Settlement systems deal with payments such as RTGS and NEFT, and currency management deals with the issue and distribution of notes and coins.
Hence, Liquidity Control.
Similar Questions
In order to control inflation and ensure stability in money market :
When RBI grants loan to commercial banks and charges interest on it, it is called :
Which among the following is not a subsidiary of Reserve Bank of India ?
(a) Deposit Insurance and Credit Gaurantee Corporation of India.
(b) Bharatiya Reserve Bank Note Mudran Private Limited.
Codes :
Which of the following financial institutions is not with in the supervisory Purview of Reserve Bank of India ?
What is SLR ratio of a bank ?
Match the items of List-I with those in List-II and select the correct answer.
List-I List-II (a) Bank Rate Policy 1. Involving the shortening of the currency of bills eligible for rediscount. (b) Credit Rationing 2. Involving the Purchase and sale of securities in the open market. (c) Variable Reserve System 3. Involving the alteration of discount rate. (d) Open Market Operations 4. Involving the variation of the minimum reserves Codes :
(a) (b) (c) (d)
Which of the following committees is intended to review the working of the monetory system in India ?
As per the RBI Act, 1934, the following functions are described as the functions of a Central Bank :
(i) Banking functions
(ii) Advisory functions
(iii) Supervisory functions
(iv) Promotional functions
Identify the correct combination :
Select the techniques of monetary control adopted by RBI from the following :
(a) Cash Reserve Ratio
(b) Statutory Liquidity Ratio
(c) Bank Rate
(d) Currency Rate
Codes :
Important Questions from Reserve Bank of India
Which of the following is not the function of Reserve Bank of India?
Which of the following banks issues currency notes in India?
Who is the Governor of the Reserve Bank of India? (As of 2017)
Which of the following statements related to the Reserve Bank of India (RBI) is/are true?
Statements:
I. RBI was established under the Reserve Bank of India Act, 1935.
II. RBI maintains a current account of State Governments for keeping their cash balances.
III. Sir Benegal Rama Rau was the longest serving governor of RBI.
Which of the following functions of Reserve Bank of India are correct?
I. Banker to Banks
II. Currency Issuer
