Arrange the following central bank reserve rates in their descending rates.
(A) Cash Reserve Ratio
(B) Repo Rate.
(C) Reverse Repo Rate.
(D) Statutory Liquidity Ratio.
Choose the correct answer from the options given below:
Arrange the following central bank reserve rates in their descending rates.
(A) Cash Reserve Ratio
(B) Repo Rate.
(C) Reverse Repo Rate.
(D) Statutory Liquidity Ratio.
Choose the correct answer from the options given below:
Solution
Option 1 -> Places CRR first, but CRR is typically the lowest among these rates.
Option 2 -> Incorrectly places CRR at the top and reverses the order of Reverse Repo and Repo rates.
Option 3 -> Correctly arranges: SLR (highest at ~18-19%), Repo Rate (~6-6.5%), Reverse Repo Rate (~3.35-6%), and CRR (lowest at ~4-4.5%).
Option 4 -> Incorrectly starts with Reverse Repo Rate which is not the highest rate.
Hence, Option 3: (D), (B), (C), (A) -> The descending order is: Statutory Liquidity Ratio (SLR) maintains the highest rate around 18-19% as banks must maintain this percentage of deposits in liquid assets. Repo Rate (the rate at which RBI lends to banks) comes next at around 6-6.5%. Reverse Repo Rate (the rate at which RBI borrows from banks) is slightly lower than Repo Rate. Cash Reserve Ratio (CRR) is the lowest, typically around 4-4.5%, representing the percentage of deposits banks must keep with RBI in cash. -> correct
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