BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Rate of interest on loans and advances will be costlier
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Industrial output would be affected to an extent
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Banks will increase rate of interest on deposits
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Industry houses may borrow money from foreign countries
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Detailed explanation-1: -“The increase in repo rate directly increases the cost of borrowing, thereby making borrowing more expensive for all types of loans, ” he said.
Detailed explanation-2: -Every time the Central Bank raises the repo rate, the stock markets are immediately affected. This means that the increase in the repo rate causes businesses to reduce their expenditure on expansion, which slows down growth, has an impact on profits and future cash flows, and causes stock prices to drop.
Detailed explanation-3: -How does Repo Rate affect Interest Rates on Loans? The RBI repo rate and the rate of interest at which banks advance loans are directly proportional. Thus with a repo rate hike, the general interest rate charged on loans by your bank will also increase and vice versa.
Detailed explanation-4: -Each time the central bank raises the repo rate-the stock market reacts immediately. This means that a rise in the repo rate causes corporations to cut back on expansion investment, resulting in a drop in growth and an impact on earnings and future cash flows, culminating in a drop in stock values.