UPSC Exam > UPSC Questions > Consider the following statements regarding V...
Start Learning for Free
Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.
1. Reserve Bank of India (RBI) conducts Variable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.
2. It is usually conducted for a shorter period, say less than 3 days.
Which of the above statements 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?
Most Upvoted Answer
Consider the following statements regarding Variable Rate Reverse Repo...
The Reserve Bank of India (RBI) has increased the amount of variable rate reverse repo (VRRR) auctions in December, as it is shifting out of the fixed-rate overnight reverse repo auction and re-establishing VRRR as the main liquidity management operations.
The operations of 14-day VRRR would continue to be complemented by longer-term VRRRs, the size and maturities of which will be decided based on continuous assessment.
Free Test
FREE
| Start Free Test |
Community Answer
Consider the following statements regarding Variable Rate Reverse Repo...
Explanation:
Variable Rate Reverse Repo (VRRR) auction:
Variable Rate Reverse Repo (VRRR) auction is conducted by the Reserve Bank of India (RBI) to absorb liquidity from the banking system. It is a tool used by the central bank to manage the liquidity conditions in the economy. The reverse repo rate is the rate at which the RBI borrows money from commercial banks. In VRRR auction, the RBI borrows money from banks by conducting a reverse repo auction at a variable rate.
Statement 1: Reserve Bank of India (RBI) conducts Variable Rate Reverse Repo (VRRR) auction to absorb liquidity in the economy.
This statement is correct. The RBI conducts VRRR auctions to absorb liquidity from the banking system. When there is excess liquidity in the market, the RBI conducts reverse repo auctions to borrow money from banks and absorb the surplus liquidity. This helps in managing inflation and maintaining stability in the financial markets.
Statement 2: It is usually conducted for a shorter period, say less than 3 days.
This statement is incorrect. VRRR auctions are typically conducted for longer durations, such as 7 days, 14 days, or even longer. The duration of the auction depends on the liquidity conditions in the market and the RBI's assessment of the need for liquidity absorption.
Conclusion:
In conclusion, statement 1 is correct as the RBI conducts VRRR auctions to absorb liquidity from the banking system. However, statement 2 is incorrect as VRRR auctions are typically conducted for longer durations, not for a shorter period like less than 3 days. Therefore, the correct answer is option 'A' - 1 only.
Variable Rate Reverse Repo (VRRR) auction:
Variable Rate Reverse Repo (VRRR) auction is conducted by the Reserve Bank of India (RBI) to absorb liquidity from the banking system. It is a tool used by the central bank to manage the liquidity conditions in the economy. The reverse repo rate is the rate at which the RBI borrows money from commercial banks. In VRRR auction, the RBI borrows money from banks by conducting a reverse repo auction at a variable rate.
Statement 1: Reserve Bank of India (RBI) conducts Variable Rate Reverse Repo (VRRR) auction to absorb liquidity in the economy.
This statement is correct. The RBI conducts VRRR auctions to absorb liquidity from the banking system. When there is excess liquidity in the market, the RBI conducts reverse repo auctions to borrow money from banks and absorb the surplus liquidity. This helps in managing inflation and maintaining stability in the financial markets.
Statement 2: It is usually conducted for a shorter period, say less than 3 days.
This statement is incorrect. VRRR auctions are typically conducted for longer durations, such as 7 days, 14 days, or even longer. The duration of the auction depends on the liquidity conditions in the market and the RBI's assessment of the need for liquidity absorption.
Conclusion:
In conclusion, statement 1 is correct as the RBI conducts VRRR auctions to absorb liquidity from the banking system. However, statement 2 is incorrect as VRRR auctions are typically conducted for longer durations, not for a shorter period like less than 3 days. Therefore, the correct answer is option 'A' - 1 only.
|
Explore Courses for UPSC exam
|
|
Similar UPSC Doubts
Top Courses for UPSCView all
Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
Question Description
Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Solutions for Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.
Here you can find the meaning of Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Consider the following statements regarding Variable Rate Reverse Repo(VRRR) auction.1. Reserve Bank of India (RBI) conductsVariable Rate Reverse Repo(VRRR) auction to absorb liquidity in the economy.2. It is usually conducted for a shorter period, say less than 3 days.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice UPSC tests.
|
|
Explore Courses for UPSC exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup