An agreement, which in fact is a contract, between the RBI and banks for the sale and repurchase of government securities and short-term treasury bills at a future date and for which the RBI indicates the interest rate, is generally known as

BANKING GENERAL KNOWLEDGE

Please wait while the activity loads.
If this activity does not load, try refreshing your browser. Also, this page requires javascript. Please visit using a browser with javascript enabled.

If loading fails, click here to try again

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

An agreement, which in fact is a contract, between the RBI and banks for the sale and repurchase of government securities and short-term treasury bills at a future date and for which the RBI indicates ‘the interest rate’, is generally known as

A	repo rate
B	bank rate
C	reverse repo rate
D	prime lending rate

Explanation:

Detailed explanation-1: -Repo rate is the rate charged on the secured loans offered by the Central bank to the commercial banks that includes collateral. It is usually conducted for the sale and repurchase of Govt securities and short-term treasury bills at a future date.

Detailed explanation-2: -For the original seller of the assets who agrees to buy them back in the future, the transaction is a reverse repo. For the original buyer who agrees to sell the assets back, it is a repo transaction.

Detailed explanation-3: -Repo Rate (RR) is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks or financial institutions in India against government securities. The current Repo Rate 2022 is at 4.40%. Changes in Repo Rate affect the flow of money in the market.

Detailed explanation-4: -Definition: Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Detailed explanation-5: -Modifying Reserve Requirements By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy.

There is 1 question to complete.