Macro

Money & Banking

Medium

Instead of outright sale of securities, the Central Bank may sell securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called . The rate at which money is withdrawn in this manner is called.

open market operations, bank rate.

open market operations, repo rate.

repurchase agreement, repo rate.

reverse repurchase agreement, reverse repo rate.

✅ Correct Option: 4

Option 1 -> Open market operations is a broad term for buying/selling securities, but doesn't specifically refer to repurchase agreements; bank rate is different from repo-related rates.

Option 2 -> Open market operations is too general; while repo rate is related, the specific agreement type is not correctly identified.

Option 3 -> Repurchase agreement (repo) is when the Central Bank buys securities to inject liquidity, not sell them to withdraw money.

Option 4 -> When Central Bank sells securities with an agreement to repurchase, it's called a reverse repurchase agreement (reverse repo), which withdraws liquidity from the system; the rate is called reverse repo rate.

Hence, reverse repurchase agreement, reverse repo rate -> In a reverse repo operation, the Central Bank sells securities to commercial banks and agrees to buy them back at a future date at a predetermined price. This temporarily withdraws money from circulation, helping control excess liquidity in the economy. The interest rate at which this transaction occurs is the reverse repo rate, which serves as a floor for short-term interest rates in the economy. This is opposite to a repo operation where the Central Bank buys securities to inject liquidity. -> correct

2026: 11 May Shift 2

Arrange the following statements related to open market operations, a tool used by the Reserve Bank of India to control money supply in the economy, in the correct order of occurrence:

A. The total amount of reserves in the economy increases.

B. RBI buys government bonds.

C. As a result, money supply will increase.

D. RBI pays for the bonds by providing a cheque.

Choose the correct answer from the options given below:

2026: 23 May Shift 1

Identify the liabilities of the commercial banks from the following:

2026: 6 June Shift 1

In open market operation if Central Bank is buying government securities, how this will impact the money supply in the market?

2026: 12 May Shift 1

The situation where people are willing to hold any amount of money at a very low interest rate is called?

2023: 29 May Shift 2

The Reserve Bank of India (RBI) recently imposed a monetary penalty on three banks -- Rs 1.50 lakhs on Dr. Ambedkar Nagarik Sahakari Bank Maryadit, Rs 25,000 on Nagarik Sahakari Bank Maryadit, and Rs 1 lakh on Ravi Commercial bank for violating the provisions of its regulations. The banking regulator has imposed a monetary penalty for contravention of non-compliance with the directions issued to Ravi Commercial bank on exposure norms and statutory and other restrictions & KYC.

Which function of central Bank is refered to in the above paragraph.

2025: 28 May Shift 1

Which of the following statements is correct about commercial banks ?

A. Considered as Money Creating system of the Indian Economy

B. They accept deposits from the public at a lower interest rate and lend out part of these funds at a higher interest rate

C. The difference between the interest rate paid to depositors and charged for lending is called "Spread".

D. Commercial banks in isolation control the money supply in India.

Choose the correct answer from the options given below:

(A), (B), (C) and D
(A), (B) and (D) only
(A), (B) and (C) only
(A) and (D) only

Instead of outright sale of securities, the Central Bank may sell securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called . The rate at which money is withdrawn in this manner is called.

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