2020 · Q51
Which one of the following is not correct about Repo rate?
General KnowledgeIndian Economy
- AIt is the interest rate charged by the Central Bank on overnight loan.
- BIt is the interest rate paid by the commercial banks on overnight borrowing.
- CIt is the interest rate agreed upon in the loan contract between a commercial bank and the Central Bank.
- DIt is the cost of collateral security.
Explanation
The repo rate is the interest rate at which the RBI lends short-term (overnight) money to commercial banks against government securities. Statements A, B and C describe it correctly. Statement D, calling it the cost of collateral security, does not describe the repo rate. Hence D.