The RBI can influence money supply by changing the rate at which it gives long-term loans to commercial banks. This rate is called the...

Option 1 -> Reverse repo rate is the rate at which RBI borrows money from commercial banks, not the rate for giving loans.

Option 2 -> Bank Rate is the rate at which RBI provides long-term loans to commercial banks.

Option 3 -> Cash Reserve Ratio is a percentage of deposits banks must maintain with RBI, not a lending rate.

Option 4 -> Repo Rate is the rate for short-term loans from RBI to banks, not long-term loans.

Hence, Option 2: Bank Rate -> Bank Rate is the rate at which the RBI provides long-term loans and financial assistance to commercial banks and financial institutions. When RBI increases the Bank Rate, borrowing becomes expensive for banks, reducing their lending capacity and thus decreasing money supply in the economy. Conversely, a decrease in Bank Rate makes borrowing cheaper, increasing money supply. This distinguishes it from Repo Rate, which is used for short-term loans (typically overnight to 14 days). -> correct