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Question

Which one among the following is correct about the Repo Rate in the Indian Economy?


A
It is the rate at which banks borrow funds from the RBI
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B
It is the rate at which banks park their funds with the Central Bank
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C
It is the percentage difference in the prices of repurchase of the bills from the original prices
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D
Both 'a' and 'c'
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Solution

The correct option is D Both 'a' and 'c'
Repo rate is a mechanism under the Liquidity Adjustment Facility (LAF) under which the banks borrow money from the Central Bank using Government securities as the collateral, with an obligation to buy back the securities later.

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