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    Question

    What is the primary purpose of the Reserve Bank of India

    (RBI) setting the repo rate?
    A To determine the rate at which banks lend to their customers Correct Answer Incorrect Answer
    B To control inflation by regulating the money supply Correct Answer Incorrect Answer
    C To set the minimum lending rate for banks Correct Answer Incorrect Answer
    D To influence the currency exchange rate Correct Answer Incorrect Answer
    E To regulate the credit risk of banks Correct Answer Incorrect Answer

    Solution

    The repo rate is the rate at which commercial banks borrow money from the RBI. A higher repo rate typically reduces inflation by discouraging borrowing and increasing the cost of money in the economy.

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