BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Interest rate
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Repo rate
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Reverse repo rate
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Bank rate
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Detailed explanation-1: -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%.
Detailed explanation-2: -The key distinction between the repo and reverse repo rates is that the repo rate earns income through lending to commercial banks, whereas the reverse repo rate earns interest on funds deposited with the Reserve Bank of India.
Detailed explanation-3: -Banks sell their securities to RBI to get loans at repo rate, with an agreement to buy back (repurchase) the securities from RBI at a later date. This is the significance of repurchase in repo rate.
Detailed explanation-4: -Reserve Bank of India (RBI), the central banking institution of India controls the monetary policy of the Indian currency. The key repo rate has been hiked on 7 December 2022 by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) by 35 basis point to 6.25%.
Detailed explanation-5: -Comparatively, Bank Rate caters to long term financial requirements of commercial banks whereas Repo Rate focuses on short term financial needs.