BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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injecting liquidity by the Central Bank of a country through purchase of government securities
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absorption of liquidity from the market by sale of government securities
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balancing liquidity with a view to enhance economic growth rate
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improving the position of availability of the securities in the market
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Detailed explanation-1: -A reverse repurchase agreement conducted by the Desk, also called a “reverse repo” or “RRP, ” is a transaction in which the Desk sells a security to an eligible counterparty with an agreement to repurchase that same security at a specified price at a specific time in the future.
Detailed explanation-2: -Reverse repos are a sign of excess liquidity in the system, meaning that banks have money left over after covering their liabilities and investing and lending what they are comfortable with.
Detailed explanation-3: -What is Meant by Reverse Repo Rate? Reverse Repo Rate is a mechanism to absorb the liquidity in the market, thus restricting the borrowing power of investors. Reverse Repo Rate is when the RBI borrows money from banks when there is excess liquidity in the market.
Detailed explanation-4: -Reverse Repo Rate is a tool used by the Reserve Bank of India primarily to absorb liquidity. The Reverse Repo Rate is an important Monetary Policy tool used by the Reserve Bank of India (RBI) to control liquidity and inflation in the economy.