Question

Q. RBI’s operation of buying government securities in the open market with an agreement to resale at a specified date and price is known as:

• A.
  Repurchase agreement or repo
• B.
  Open Market Operations
• C.
  Reverse repurchase agreement or reverse repo
• D.
  Liquidity Adjustment Facility (LAF)

Answer 1

The correct option is A

Repurchase agreement or repo

Explanation:

Under repo or repurchase agreement, RBI purchases government securities with an agreement to resale this security at a specified date and price.

Whereas under Open Market Operations RBI buys or sells the government securities in open market without any promise to purchase or sell it at later date.