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Consider the following statements:
1. Repo rate and Reverse repo rate as an instrument of money market were introduced post economic reforms of 1991.
2. In reverse repo, RBI is the lender whereas Banks and Financial Institutions are borrowers.
Which of the statements given above is/are correct?
1. Repo rate and Reverse repo rate as an instrument of money market were introduced post economic reforms of 1991.
2. In reverse repo, RBI is the lender whereas Banks and Financial Institutions are borrowers.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
Consider the following statements:1. Repo rate and Reverse repo rate a...
In reverse repo RBI absorbs excess liquidity and acts a borrower. IN Repo rate transaction the RBI acts as a lender as it infuses more money in the system.
Most Upvoted Answer
Consider the following statements:1. Repo rate and Reverse repo rate a...
Introduction:
Repo rate and Reverse Repo rate are two important tools of monetary policy used by the Reserve Bank of India (RBI) to regulate the money supply in the economy.
Statement 1:
Repo rate and Reverse repo rate as an instrument of money market were introduced post economic reforms of 1991.
This statement is correct. The repo rate and reverse repo rate were introduced as a part of the economic reforms of 1991. These rates were introduced to regulate the money supply in the economy and to maintain price stability.
Statement 2:
In reverse repo, RBI is the lender whereas Banks and Financial Institutions are borrowers.
This statement is incorrect. In reverse repo, RBI is the borrower and banks and financial institutions are lenders. In reverse repo, banks and financial institutions lend money to RBI and in return, RBI provides them with government securities as collateral.
Conclusion:
Hence, the correct answer is option 'A', i.e., statement 1 only.
Repo rate and Reverse Repo rate are two important tools of monetary policy used by the Reserve Bank of India (RBI) to regulate the money supply in the economy.
Statement 1:
Repo rate and Reverse repo rate as an instrument of money market were introduced post economic reforms of 1991.
This statement is correct. The repo rate and reverse repo rate were introduced as a part of the economic reforms of 1991. These rates were introduced to regulate the money supply in the economy and to maintain price stability.
Statement 2:
In reverse repo, RBI is the lender whereas Banks and Financial Institutions are borrowers.
This statement is incorrect. In reverse repo, RBI is the borrower and banks and financial institutions are lenders. In reverse repo, banks and financial institutions lend money to RBI and in return, RBI provides them with government securities as collateral.
Conclusion:
Hence, the correct answer is option 'A', i.e., statement 1 only.
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Consider the following statements:1. Repo rate and Reverse repo rate as aninstrument of money market were introducedpost economic reforms of 1991.2. In reverse repo, RBI is the lender whereasBanks and Financial Institutions areborrowers.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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