Which of the following are true-
a) Under a repo, RBI buys securities without any promise to sell them back later.
b) The rate at which RBI gives loans to commercial banks is called the bank rate.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → b is true, a is not
a) Under a repo, RBI buys securities without any promise to sell them back later. — Incorrect. In a repo the RBI buys securities with an agreement that fixes the date and price of resale. A purchase with no promise to sell back is an outright operation.
b) The rate at which RBI gives loans to commercial banks is called the bank rate. — Correct. This is the bank rate.
NCERT (2026-27): “3.4 Policy Tools to Control Money Supply … There are two types of open market operations: outright and repo. Outright open market operations are permanent in nature: when the central bank buys these securities (thus injecting money into the system), it is without any promise to sell them later. … However, there is another type of operation in which 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 RBI can influence money supply by changing the rate at which it gives loans to the commercial banks. This rate is called the Bank Rate in India.” |