BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

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

If a bank has to borrow funds from RBI for a long term, which among the following will be applicable?

A	Repo Rate
B	Reverse Repo
C	Bank Rate
D	liquidity Adjustment Facility

Explanation:

Detailed explanation-1: -Repo rate is the rate by which the central bank gives loans to the commercial banks. Thus, banks borrow money from Reserve Bank Of India by Repo rate. Repo rate is also used as a monetary method to control inflation.

Detailed explanation-2: -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-3: -Banks can grant fixed rate loans to long term projects wherein the interest rate are fixed till the loan is due for refinancing. The loan, at the time of refinancing, will be treated as a fresh fixed rate loan with a maturity period equal to the period upto the next date of refinancing.

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