Question

Based on the passage below, answer the following question.

The Monetary Policy Committee of the Reserve Bank of India kept interest rates on hold Thursday even as it vowed to keep policy sufficiently loose to help revive the coronavirus battered economy. Accepting a key demand of lenders and the corporate sector, the central bank cleared a one-time restructuring of loan accounts to bail out stressed borrowers, including personal, small, and medium loans.

The details of the loan restructuring scheme – expected to kick in after the moratorium on loan repayments ends. August 31 – will be worked out by a committee headed by former ICICI Bank Chairman KV Kamath. The RBI also continued to provide support on the liquidity front and opened a new targeted window for small lenders.

The central bank kept the repo rate unchanged at 4 percent and reduced the reverse repo rate to 3:35 percent.

What does the ‘Repo Rate’ mean?

Options

• Rate at which banks borrow from the RBI for short term.

• Rate at which banks borrow from the RBI for long term.

• Rate at which banks deposit excess funds with the RBI.

• Rate at which banks lend funds to the public.

Answer 1

Rate at which banks borrow from the RBI for short term.