Question

The rate at which the Reserve Bank of India lends, money to commercial banks for long period is called ________________.

• A. Repo Rate
• B. Goring Rate
• C. Bank Rate
• D. None of the above

Answer 1

The correct option is A Repo Rate

The rate at which the Reserve Bank of India lends, money to commercial banks for long period is called repo rate. If repo rate gets reduced by the Central bank then it is easier for the commercial banks to get money at a cheaper rate, whereas if the repo rate gets increased then it discourages the commercial banks to increase the money supply in an economy. Repo rate is one of the quantitative methods of controlling credit creation capacity by the RBI.