ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When there is a need for an economic boost, RBI pumps funds into the system by helping commercial banks borrow money from the bank. Using repo, banks raise the necessary capital to increase their lending capacity. This ensures liquidity for the bank and proper cash flow into the market.

Detailed explanation-2: -As Banker to banks, the Reserve Bank provides short-term loans and advances to select banks, when necessary, to facilitate lending to specific sectors and for specific purposes.

Detailed explanation-3: -Definition. Bank Rate is the rate or discount at which RBI grants loans or advances to commercial banks. Hence, it is also called Discount Rate. The money that commercial banks repay to RBI is the interest amount on the loans.

Detailed explanation-4: -The Reserve Bank of India (RBI) increased the repo rate on 8 February 2023 by 25 basis points to 6.50%. Earlier, the repo rate was 6.25%. The repo rate has been hiked by 250 basis points since May of 2022 in an effort to contain inflation.

Detailed explanation-5: -The rate at which the banks borrow short-term money from the RBI against securities or bonds. It is the rate at which the borrower will be charged if he does not pay the loan EMI as per the repayment schedule of the loan. The rate at which the central bank borrows money from the commercial banks in the country.