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Discussion

Which among the following defines Repo Rate?

  • A.The rate at which banks place their surplus funds with the RBI
  • B.The rate at which banks can borrow against their excess SLR securities to meet additional liquidity requirements
  • C.The rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase
  • D.The rate at which banks borrow funds from the Reserve Bank against eligible collaterals

Answer: D

Repo rate is the rate at which banks borrow funds from the Reserve Bank against eligible collaterals under the liquidity adjustment facility (LAF).

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