The Reserve Bank of India (RBI) has lowered its repurchase rate by 25 basis points (BP) to 6.25%, marking a top-notch cut in five years since May 2020. This decision was made in the sixth and last bimonthly monetary policy. Newly appointed RBI Governor Sanjay Malhotra leads the fiscal 25 review. The Monetary Policy Committee (MPC) was considered from February 5 to 7, making this the first policy decision after the Alliance budget 2025-26. The reduction in repurchase rates amid global economic uncertainty is due to tariffs from Canada, Mexico and China, which shows the intention of the Reserve Bank of India to help increase economic growth, improve liquidity and encourage borrowing.
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Founded in 1935, the Reserve Bank of India (RBI) is a central banking institution in India, responsible for monetary policy formulation, financial stability and regulation of banks and NBFCs. It controls inflation, liquidity and monetary management while ensuring economic growth and stability. The Monetary Policy Committee (MPC), a six-member agency within the Reserve Bank of India, determines key interest rates such as reserve ratios, reverse repurchase rates and CRR, which directly affect the costs of borrowing and investing in the economy.
Answer to GK question with repo rate
The repurchase rate is a crucial tool used by central banks to control economic inflation and liquidity. Check your knowledge with these important GK questions and answers!
Q1. What is the repo rate?
a) Interest rate of loans from commercial banks to the Reserve Bank of India
b) Interest rates lend to commercial banks by the Reserve Bank of India
c) Speed of government borrowing from the Reserve Bank of India
d) Speed of the Reserve Bank of India’s loans to the government
Answer: b
Note: The repurchase rate is the rate at which the Reserve Bank of India borrows from commercial banks in any situation of insufficient funds.
Q2. As of the latest Reserve Bank of India announcement, what is the current repurchase rate?
a) 6.50%
b) 6.25%
c) 6.75%
D) 6.00%
Answer: b
Note: The Reserve Bank of India recently reduced its repurchase rate by 25 basis points to 6.25%.
Q3. What is the main purpose of adjusting the repo rate?
a) Control the money supply in the economy
b) Standardize foreign exchange rates
c) Manage the government’s fiscal deficit
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d) Control the stock market
answer:
Note: Adjusting the repurchase rate will help the RBI control the money supply in the economy, thereby managing inflation and economic growth.
Q4. How does a decrease in the repurchase rate affect the economy?
a) This makes borrowing more expensive
b) It makes borrowing cheaper
c) This has no effect on the borrowing cost
d) It only affects foreign investors
Answer: b
Note: The decline in repurchase rates reduces the borrowing costs of commercial banks, which may lead to lower interest rates for consumers and businesses, thereby encouraging spending and investment.
Q5. Which organization in RBI is responsible for setting the repo rate?
a) Central Board of Directors
B) Monetary Policy Committee (MPC)
c) Financial Stability and Development Committee
D) Economic Advisory Committee
Answer: b
Note: RBI’s Monetary Policy Committee (MPC) is responsible for setting the repurchase rate. MPC was founded in 2016 in 2016 (Amendment) in 2016 to make monetary policy decisions more transparent.
Q6. What is the reverse storage rate?
a) Interest rate lent to commercial banks by the Reserve Bank of India
b) Interest rate for commercial banks to loan to the Reserve Bank of India
c) Speed of government borrowing from the Reserve Bank of India
d) Speed of the Reserve Bank of India’s loans to the government
Answer: b
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Note: The reverse repurchase rate is the tax rate for the Reserve Bank of India to borrow from commercial banks within the country.
Q7. How does the increase in repurchase interest rates affect inflation?
a) Increase inflation
b) Reduce inflation
c) It will not affect inflation
d) It only affects core inflation
Answer: b
Note: Increased repurchase rates make borrowing more expensive, which can reduce spending and investment, which helps control inflation.
Q8. What is Cash Reserve Ratio (CRR)?
a) The percentage of deposits that the bank must keep with the Reserve Bank of India
b) Interest rates charged by banks for loans
c) Total loans provided by the bank
d) Interest rates lend to commercial banks by the Reserve Bank of India
answer:
Note: The cash reserve ratio (CRR) is the percentage of the total bank deposits and must be maintained in the form of liquid cash at the Reserve Bank of India.
Q10. Which of the following is a qualitative tool for monetary policy?
a) Repurchase rate
b) Open market operation
c) Moral Su language
D) Cash reserve ratio
Answer: c
Note: Moral Su language is a qualitative tool, and the Reserve Bank of India convinces banks to comply with its policies.
Also read: GK question with answers to union budget
Source: https://dinhtienhoang.edu.vn
Category: Optical Illusion