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Doctors Medicines MCQs Q&A

  1. 1 only
  2. 2 only
  3. 3 only
  4. 1, 2 and 3
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1 Answers

Option 1 : 1 only

The correct answer is 1 only.

Repo Rate is the rate at which RBI lends money to Commercial Banks generally against Government Securities.

  • Repo in repo rate stands means Repurchasing Option.
  • Commercial Banks borrow money from the Reserve Bank of India at some rate which is called Repo Rate.
  • Repo rate is applicable to short term borrowings, for example for 7 or 14 or 28 days.
  • Another related term is Reverse Repo Rate, which is the rate provided by RBI when commercial banks keep their surplus with it.
  • Repo Rate as a tool used in Monetary policy:
    • RBI keeps on regulating Repo rate as a part of its monetary policy.
    • Easy/ Cheap money policy (lower repo rate):
      • Banks borrow money from RBI at lower rates and hence the banks can also lend money to their borrowers at cheaper rates.
      • Money is available to spend at lower rates.
      • Increases the liquidity in the market.
      • It controls deflation and also boosts the purchasing power of consumers.
    • Tight/ Dear money policy (higher repo rate):
      • Banks borrow money from RBI at higher rates and hence the people have to borrow the money from banks at higher rates.
      • People refrain from borrowing money from banks.
      • Decreases the liquidity in market controls inflation.
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