PYQ · APPSC Group II 2019 · Screening Test · Q122 Difficulty 1/5
Money, Banking & Monetary Policy› Monetary Policy Tools & Transmission
Repo Rate is the rate at which
Answer a.
Explanation Answer · a
The answer is (a). The repo rate is the rate at which the RBI lends money to commercial banks. Repo means 'repurchase'. A commercial bank sells government securities to the RBI for short-term funds and agrees to buy them back later. The interest rate charged on this short-term loan is the repo rate. A higher repo rate makes borrowing dearer and tends to reduce credit and inflation, and a lower rate does the opposite. The reverse of this is the reverse repo rate, at which the RBI borrows from banks.
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