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Which of the following statements are correct about monetary policy instruments of RBI?

A. Bank rate is the rate at which RBI lends to commercial banks for long term.

B. Repo rate is the rate at which RBI lends to commercial banks for short period.

C. Open market operation is the buying and selling of government securities by RBI to regulate money supply.

D. Reverse repo rate is the rate at which RBI lends to commercial banks for medium period.

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 1

Bank rate (long-term lending rate, A), repo rate (short-term lending rate, B), and open market operations (buying/selling securities, C) are correctly described. D is incorrect: reverse repo is the rate at which RBI borrows from, not lends to, commercial banks. So A, B and C only.

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