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What is REPO RATE ? || Monetary Policy का Overall ANALYSIS || Lecture #8 For RBI ; SBI ; BANK Video Lecture | Banking Awareness for IBPS/SBI/LIC/Insurance exams (Hindi) - Banking Exams

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FAQs on What is REPO RATE ? -- Monetary Policy का Overall ANALYSIS -- Lecture #8 For RBI ; SBI ; BANK Video Lecture - Banking Awareness for IBPS/SBI/LIC/Insurance exams (Hindi) - Banking Exams

1. What is the repo rate?
Ans. The repo rate is the rate at which the central bank (such as RBI) lends money to commercial banks for a short period. It is a tool used by the central bank to control inflation, stimulate economic growth, and manage liquidity in the banking system.
2. How does the repo rate affect monetary policy?
Ans. The repo rate plays a crucial role in monetary policy. When the central bank lowers the repo rate, it becomes cheaper for commercial banks to borrow money. This, in turn, encourages banks to lend more money to businesses and individuals, stimulating economic growth. Conversely, when the central bank raises the repo rate, it becomes more expensive for banks to borrow money, leading to reduced lending and slower economic growth.
3. What are the implications of a higher repo rate?
Ans. A higher repo rate indicates that the central bank wants to curb inflation and reduce liquidity in the banking system. This means that borrowing becomes more expensive for commercial banks, which can lead to higher interest rates for businesses and individuals. As a result, consumers may reduce their spending, investments may decrease, and economic growth may slow down.
4. How does the repo rate affect banks and lending rates?
Ans. The repo rate directly affects the lending rates offered by commercial banks. When the repo rate is lowered, banks can borrow money at a lower cost from the central bank and, in turn, reduce their lending rates. This makes borrowing cheaper for businesses and individuals, encouraging investment and spending. Conversely, when the repo rate is increased, banks face higher borrowing costs, which can lead to higher lending rates and a decrease in borrowing and spending.
5. How does the repo rate impact the common person?
Ans. The repo rate indirectly affects the common person through its impact on lending rates. When the repo rate is lowered, banks may reduce their lending rates, making it cheaper for individuals to borrow money for various purposes such as home loans, car loans, or personal loans. This can stimulate consumption and investment. Conversely, when the repo rate is increased, lending rates may go up, making borrowing more expensive for individuals, which can reduce spending and investment.
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