What is Bank Rate and Repo Rate

  1. Bank rate is the rate of interest which RBI charges its clients on their short-term borrowing.
  2.  Repo rate is the rate of interest which RBI Charges its clients on their long term borrowing.

Which of the statements given above is/are incorrect?

  1. I only
  2.  II only
  3.  Both I and II
  4.  Neither I nor II
Monis Rasool Professor Asked on 11th May 2015 in Economics.
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  • 1 Answer(s)
    Best answer

    Neither I nor II

    Bank Rate-Interest rate paid by major banks if they borrow from Central Bank of India (RBI) and If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa.

    Repo Rate-The rate at which the RBI lends money to banks for short-term against securities.

    Both terms which is given in the question are opposite;
    “Bank rate is the rate of interest which RBI charges its clients on their short-term”.
    “Repo rate is the rate of interest which RBI Charges its clients on their long-term borrowing”.

    Monis Rasool Professor Answered on 29th July 2015.
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