The rate at which banks park short-term excess liquidity with RBI, is called:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Reverse Repo Rate
The reverse repo rate is the rate of interest the RBI pays when commercial banks park their surplus short-term funds with it; in other words, the rate at which the RBI borrows from banks. Raising it draws money out of the banking system, which helps control inflation.