The rate at which the Reserve Bank of India lends to other commercial banks for the short term has been reduced. What is this rate called?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is Option 4 i.e. Repo Rate.
The rate at which the Reserve Bank of India (RBI) lends money to commercial banks for the short term is called the repo rate (repurchase rate). When the repo rate is reduced, borrowing becomes cheaper for banks, encouraging them to lend more to businesses and consumers, thereby boosting economic activity. The RBI uses this monetary policy tool to control inflation, regulate liquidity, and manage economic growth. Changes in the repo rate directly influence interest rates across the economy.