Question
Download Solution PDFWhat is the meaning of reverse repo rate?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Rate at which RBI borrows money from commercial banks.Key Points
- Reverse repo rate:
- It is the rate at which the Reserve Bank of India (RBI) borrows money from commercial banks.
- It is a tool used by RBI to control the money supply in the economy.
- Repo rate is usually higher than the Reverse repo rate.
- A higher reverse repo rate means commercial banks will earn higher returns by lending to RBI, leading to a decrease in lending to customers and a decrease in money supply in the economy.
Additional Information
- Option 1 is incorrect as RBI does not borrow from foreign banks, it only lends to them.
- Option 3 is the repo rate, not the reverse repo rate.
- Option 4 is incorrect as commercial banks borrow from RBI, not foreign banks.
- Reverse repo rate is an important tool in monetary policy as it helps RBI control inflation and maintain economic stability.
Last updated on Jul 7, 2025
-> SSC MTS Notification 2025 has been released by the Staff Selection Commission (SSC) on the official website on 26th June, 2025.
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