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Functions of the Central Bank

When RBI gran...

Question

When RBI grants a loan to commercial banks and charges interest on it, it is called _________.

A

Rapo rate

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B

Reverse Rapo rate

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C

Sweep stack rate, basic rate

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D

Bank rate

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Solution

The correct option is D Bank rate
A bank rate is the rate of interest which a central bank (RBI) charges on the loans and advances that it extends to commercial banks and other financial intermediaries. RBI uses this tool to control the money supply.

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