{"id":89687,"date":"2025-06-01T10:10:33","date_gmt":"2025-06-01T10:10:33","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=89687"},"modified":"2025-06-01T10:10:33","modified_gmt":"2025-06-01T10:10:33","slug":"consider-the-following-statements-1-repo-rate-is-the-interest-rate","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/","title":{"rendered":"Consider the following statements:\n  1. Repo rate is the interest rate"},"content":{"rendered":"<p>Consider the following statements:<\/p>\n<ul>\n<li>1. Repo rate is the interest rate at which RBI lends to commercial banks for short period.<\/li>\n<li>2. Reverse repo rate is the interest rate which RBI pays to commercial banks on short-term deposits.<\/li>\n<li>3. Gap between repo rate and reverse repo rate has been declining in India in the recent past.<\/li>\n<\/ul>\n<p>Which of the statements given above is\/are not correct?<\/p>\n<p>[amp_mcq option1=&#8221;1&#8243; option2=&#8221;2 only&#8221; option3=&#8221;3 only&#8221; option4=&#8221;2 and 3&#8243; correct=&#8221;option3&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC CAPF &#8211; 2013<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-capf-2013.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-capf-2013\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nThe correct option is C because statement 3 is not correct.<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\n&#8211; Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods.<br \/>\n&#8211; Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI.<br \/>\n&#8211; Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap &#8220;in the recent past&#8221; is generally incorrect or not a consistent trend.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nThe policy corridor width is a tool used by the RBI to manage liquidity and interest rate volatility. For example, the corridor was historically 100 basis points (bps) wide, then narrowed to 50 bps. The introduction of the Standing Deposit Facility (SDF) in 2022 replaced the fixed rate reverse repo as the floor of the corridor, typically set 25 bps below the policy repo rate, with MSF rate 25 bps above, maintaining a 50 bps corridor.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Consider the following statements: 1. Repo rate is the interest rate at which RBI lends to commercial banks for short period. 2. Reverse repo rate is the interest rate which RBI pays to commercial banks on short-term deposits. 3. Gap between repo rate and reverse repo rate has been declining in India in the recent &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Consider the following statements:\n  1. Repo rate is the interest rate\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/#more-89687\">Detailed Solution<span class=\"screen-reader-text\">Consider the following statements:<br \/>\n  1. Repo rate is the interest 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":[1085],"tags":[1467,1120,1190],"class_list":["post-89687","post","type-post","status-publish","format-standard","hentry","category-upsc-capf","tag-1467","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Consider the following statements:  1. Repo rate is the interest rate<\/title>\n<meta name=\"description\" content=\"The correct option is C because statement 3 is not correct. - Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods. - Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI. - Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap &quot;in the recent past&quot; is generally incorrect or not a consistent trend.\" \/>\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\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Consider the following statements:  1. Repo rate is the interest rate\" \/>\n<meta property=\"og:description\" content=\"The correct option is C because statement 3 is not correct. - Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods. - Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI. - Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap &quot;in the recent past&quot; is generally incorrect or not a consistent trend.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T10:10:33+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":"Consider the following statements:  1. Repo rate is the interest rate","description":"The correct option is C because statement 3 is not correct. - Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods. - Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI. - Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap \"in the recent past\" is generally incorrect or not a consistent trend.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/","og_locale":"en_US","og_type":"article","og_title":"Consider the following statements:  1. Repo rate is the interest rate","og_description":"The correct option is C because statement 3 is not correct. - Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods. - Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI. - Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap \"in the recent past\" is generally incorrect or not a consistent trend.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T10:10:33+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\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/","url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/","name":"Consider the following statements: 1. Repo rate is the interest rate","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T10:10:33+00:00","dateModified":"2025-06-01T10:10:33+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"The correct option is C because statement 3 is not correct. - Statement 1 correctly defines the repo rate as the rate at which the RBI lends money to commercial banks for short periods. - Statement 2 correctly defines the reverse repo rate as the rate at which the RBI borrows money from commercial banks for short periods, effectively paying interest on their short-term deposits with the RBI. - Statement 3 claims that the gap between the repo rate and the reverse repo rate has been declining in India in the recent past. The Reserve Bank of India (RBI) manages a policy corridor defined by the Marginal Standing Facility (MSF) rate as the ceiling, the policy repo rate in the middle, and the Standing Deposit Facility (SDF) rate (or the operational reverse repo rate before SDF became the floor) as the floor. While the absolute rates change, the *gap* or width of this corridor (e.g., the difference between the repo rate and the floor rate) is determined by RBI policy and is often kept constant for extended periods (e.g., 25 bps difference between repo and SDF\/RRR). Changes to this gap are specific policy decisions, not a continuous decline. Therefore, claiming a continuous decline in the gap \"in the recent past\" is generally incorrect or not a consistent trend.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-repo-rate-is-the-interest-rate\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC CAPF","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-capf\/"},{"@type":"ListItem","position":3,"name":"Consider the following statements: 1. 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