Which of the following definitions are in correct ? Basis points: increase in interest rates in percentage terms. Repo rate: rate at which commercial banks borrow from the RBI by selling their securities or financial assets to the RBI for a longperiod of time. Reverse repo rate: rate of interest at which the central bank borrows funds from commercial banks for a short duration. Cash reserve ratio: minimum percentage of cash deposits that banks must keep with itself to avoid liquidity issues. Options: A . &nbsp(ii) & (iv) B . &nbsp(ii), (iii) & (iv) C . &nbsp(i) & (ii) D . &nbsp(iii) & (iv)

Which of the following definitions are in correct? Basis points: increase in

Question

Which of the following definitions are in correct?

Basis points: increase in interest rates in percentage terms.

Repo rate: rate at which commercial banks borrow from the RBI by selling their securities or financial assets to the RBI for a longperiod of time.

Reverse repo rate: rate of interest at which the central bank borrows funds from commercial banks for a short duration.

Cash reserve ratio: minimum percentage of cash deposits that banks must keep with itself to avoid liquidity issues.

Options:

A . (ii) & (iv)

B . (ii), (iii) & (iv)

C . (i) & (ii)

D . (iii) & (iv)

Answer: Option A
Answer: (a)
Basis points: It is the increase in interest rates in percentage terms.
Repo rate: Repo rate is the policy rate and is part of RBI’s Liquidity Adjustment Facility (LAF). It is the rate at which commercial banks borrow from the RBI by selling their securities or financial assets to the RBI for a short period of time.
Reverse repo rate: Reverse Repo Rate is also a part of LAF. It is the rate of interest at which the central bank borrows funds from commercial banks for a short duration.
Cash reserve ratio: CRR is the minimum percentage of cash deposits that banks must keep with the central bank.

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