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    Question

    In the RBI’s liquidity framework review, which rate is

    retained as the operating target despite weakening activity in the overnight market?
    A Repo Rate Correct Answer Incorrect Answer
    B Reverse Repo Rate Correct Answer Incorrect Answer
    C Weighted Average Call Rate (WACR) Correct Answer Incorrect Answer
    D Marginal Standing Facility Rate Correct Answer Incorrect Answer
    E Bank Rate Correct Answer Incorrect Answer

    Solution

    The RBI’s IWG emphasized keeping the Weighted Average Call Rate (WACR) as the operating target for monetary policy implementation. However, the report noted a concern: the declining activity in the overnight call money market weakens RBI’s grip on short-term interest rates. Despite this, WACR remains a benchmark for assessing the alignment of short-term money market rates with the policy rate, making it central to the liquidity management framework.

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