Question

    The central Bank (RBI) buys the government security with

    the agreement of the resale of the security at a rate called:
    A Reverse repo rate Correct Answer Incorrect Answer
    B Repo rate Correct Answer Incorrect Answer
    C Bank Rate Correct Answer Incorrect Answer
    D Marginal Cost of Funds Based Lending Rate Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    When the central bank buys the security, this agreement of purchase also has specification about date and price of resale of this security. This type of agreement is called a repurchase agreement or repo. The interest rate at which the money is lent in this way is called the repo rate.

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