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The rate at which Reserve Bank of India lends short term money to commercial banks in the event of any shortfall of funds is called:  

The rate at which Reserve Bank of India lends short term money to commercial banks in the event of any shortfall of funds is called:   Correct Answer Repo Rate 

The correct answer is Repo Rate.

Key Points

  • Repo Rate is the rate at which the Reserve Bank Of India lends money to commercial banks in India if they face a scarcity of funds.
  • Current Repo Rate: 4%.
  • It is a rate on short-term, collateral-backed borrowing.
  • Repo rate is used by monetary authorities to control inflation.

Additional Information 

  • Reverse Repo Rate
    • It is the rate at which the Reverse Bank of India borrows funds from commercial banks.
    • It is the rate at which commercial banks in India deposit their excess money with the Reserve Bank of India usually for the short-term.
    • Current Reverse Repo Rate: 3.35%.
  • Sovereign Rate
    • It is similar to the corporate bond credit ratings.
    • It is based upon an assessment of both the ability and the willingness of a country to service its debt.
  • Prime Lending Rate
    • It is an interest rate used by the banks at which banks lend to customers with good credit.

Related Questions

Which of the following statements are true in context of scheduled banks?
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2. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.
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4. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Co-operative Banks.
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2. Treasury bills are instruments of short-term borrowing by the Government of India, issued as promissory notes under discount.
3. A reduction in the repo rate helps banks to get money at a cheaper rate.
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