{"id":85023,"date":"2025-06-01T03:00:21","date_gmt":"2025-06-01T03:00:21","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=85023"},"modified":"2025-06-01T03:00:21","modified_gmt":"2025-06-01T03:00:21","slug":"which-one-of-the-following-is-not-correct-about-repo-rate","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/","title":{"rendered":"Which one of the following is not correct about Repo rate?"},"content":{"rendered":"

Which one of the following is not correct about Repo rate?<\/p>\n

[amp_mcq option1=”It is the interest rate charged by the Central Bank on overnight loan.” option2=”It is the interest rate paid by the commercial banks on overnight borrowing.” option3=”It is the interest rate agreed upon in the loan contract between a commercial bank and the Central Bank.” option4=”It is the cost of collateral security.” correct=”option4″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CDS-1 – 2020<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nRepo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, usually against government securities.
\n– Option A is correct: It is the interest rate charged by the Central Bank (RBI) on loans (often overnight\/short term).
\n– Option B is correct: From the perspective of commercial banks, it is the interest rate paid on their overnight borrowing from the RBI.
\n– Option C is correct: It is indeed the interest rate agreed upon in the repo transaction contract between the bank and the RBI.
\n– Option D is incorrect: Repo rate is an interest rate, not the cost of the collateral security itself. The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount.
\n<\/section>\n
\n– Repo rate is a key monetary policy tool used by the RBI.
\n– It stands for Repurchase Rate. In a repo transaction, banks sell securities to RBI with an agreement to repurchase them at a later date at a pre-determined price (which includes the interest component).
\n– The repo rate influences borrowing costs for banks and thereby affects liquidity in the financial system.
\n<\/section>\n
\nThe opposite of repo rate is the Reverse Repo Rate, at which the RBI borrows money from commercial banks. The Marginal Standing Facility (MSF) rate is typically higher than the repo rate and is used by banks for emergency borrowing.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Which one of the following is not correct about Repo rate? [amp_mcq option1=”It is the interest rate charged by the Central Bank on overnight loan.” option2=”It is the interest rate paid by the commercial banks on overnight borrowing.” option3=”It is the interest rate agreed upon in the loan contract between a commercial bank and the … <\/p>\n

Detailed SolutionWhich one of the following is not correct about Repo rate?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1087],"tags":[1288,1120,1190],"class_list":["post-85023","post","type-post","status-publish","format-standard","hentry","category-upsc-cds-1","tag-1288","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nWhich one of the following is not correct about Repo rate?<\/title>\n<meta name=\"description\" content=\"Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, usually against government securities. - Option A is correct: It is the interest rate charged by the Central Bank (RBI) on loans (often overnight\/short term). - Option B is correct: From the perspective of commercial banks, it is the interest rate paid on their overnight borrowing from the RBI. - Option C is correct: It is indeed the interest rate agreed upon in the repo transaction contract between the bank and the RBI. - Option D is incorrect: Repo rate is an interest rate, not the cost of the collateral security itself. The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount. - Repo rate is a key monetary policy tool used by the RBI. - It stands for Repurchase Rate. In a repo transaction, banks sell securities to RBI with an agreement to repurchase them at a later date at a pre-determined price (which includes the interest component). - The repo rate influences borrowing costs for banks and thereby affects liquidity in the financial system.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which one of the following is not correct about Repo rate?\" \/>\n<meta property=\"og:description\" content=\"Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, usually against government securities. - Option A is correct: It is the interest rate charged by the Central Bank (RBI) on loans (often overnight\/short term). - Option B is correct: From the perspective of commercial banks, it is the interest rate paid on their overnight borrowing from the RBI. - Option C is correct: It is indeed the interest rate agreed upon in the repo transaction contract between the bank and the RBI. - Option D is incorrect: Repo rate is an interest rate, not the cost of the collateral security itself. The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount. - Repo rate is a key monetary policy tool used by the RBI. - It stands for Repurchase Rate. In a repo transaction, banks sell securities to RBI with an agreement to repurchase them at a later date at a pre-determined price (which includes the interest component). - The repo rate influences borrowing costs for banks and thereby affects liquidity in the financial system.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T03:00:21+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Which one of the following is not correct about Repo rate?","description":"Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, usually against government securities. - Option A is correct: It is the interest rate charged by the Central Bank (RBI) on loans (often overnight\/short term). - Option B is correct: From the perspective of commercial banks, it is the interest rate paid on their overnight borrowing from the RBI. - Option C is correct: It is indeed the interest rate agreed upon in the repo transaction contract between the bank and the RBI. - Option D is incorrect: Repo rate is an interest rate, not the cost of the collateral security itself. The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount. - Repo rate is a key monetary policy tool used by the RBI. - It stands for Repurchase Rate. 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The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount. - Repo rate is a key monetary policy tool used by the RBI. - It stands for Repurchase Rate. In a repo transaction, banks sell securities to RBI with an agreement to repurchase them at a later date at a pre-determined price (which includes the interest component). - The repo rate influences borrowing costs for banks and thereby affects liquidity in the financial system.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T03:00:21+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/","url":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-correct-about-repo-rate\/","name":"Which one of the following is not correct about Repo rate?","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T03:00:21+00:00","dateModified":"2025-06-01T03:00:21+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, usually against government securities. - Option A is correct: It is the interest rate charged by the Central Bank (RBI) on loans (often overnight\/short term). - Option B is correct: From the perspective of commercial banks, it is the interest rate paid on their overnight borrowing from the RBI. - Option C is correct: It is indeed the interest rate agreed upon in the repo transaction contract between the bank and the RBI. - Option D is incorrect: Repo rate is an interest rate, not the cost of the collateral security itself. The collateral security (e.g., government bonds) is what is pledged by the bank to obtain the loan, and it has its own market value or cost, which is distinct from the interest charged on the loan amount. - Repo rate is a key monetary policy tool used by the RBI. - It stands for Repurchase Rate. 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