Which of the following option denotes the rate at which commercial banks park their excess reserves with RBI?
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Reverse repo rate
The reverse repo rate is the rate at which commercial banks park their excess reserves with the Reserve Bank of India (RBI). It is a tool used by the central bank to manage liquidity in the banking system by offering an interest rate to banks for their excess reserves deposited with the RBI.
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Open Market Rate: This is not a standard term used for a specific rate. It refers to the rates involved in open market operations, which include repo and reverse repo rates.
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Repo Rate: This is the rate at which the RBI lends money to commercial banks against collateral, not the rate for parking excess reserves.
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MSF Rate (Marginal Standing Facility Rate): This is the rate at which banks can borrow overnight funds from the RBI in case of emergency, not the rate for parking excess reserves.