General Knowledge Questions With Answers On Repo Rate

The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points (bps) to 6.25%, marking the first rate cut in five years since May 2020. This decision was made during the sixth and final bi-monthly monetary policy review of FY25, led by the newly appointed RBI Governor, Sanjay Malhotra. The Monetary Policy Committee (MPC) deliberated from February 5 to 7, making this the first policy decision post the Union Budget 2025-26. The repo rate cut comes amidst global economic uncertainties, including US-imposed tariffs on Canada, Mexico, and China, signalling RBI’s intent to boost economic growth, improve liquidity, and encourage borrowing. 

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The Reserve Bank of India (RBI), established in 1935, is India's central banking institution, responsible for monetary policy formulation, financial stability, and regulation of banks and NBFCs. It controls inflation, liquidity, and currency management while ensuring economic growth and stability. The Monetary Policy Committee (MPC), a six-member body within the RBI, determines key rates like the repo rate, reverse repo rate, and CRR, directly influencing the cost of borrowing and investment in the economy.

GK Questions With Answers On Repo Rate 

The Repo Rate is a crucial tool used by central banks to control inflation and liquidity in the economy. Check your knowledge with these important GK questions and answers on the Repo Rate! 

Q1. What is the repo rate? 

A) The rate at which commercial banks lend to the RBI

B) The rate at which the RBI lends to commercial banks

C) The rate at which the government borrows from the RBI

D) The rate at which the RBI lends to the government

Answer: B

Explanation: The repo rate is the rate at which the Reserve Bank of India lends money to commercial banks in the event of any shortfall of funds.

Q2. As of the latest RBI announcement, what is the current repo rate?

 A) 6.50%

B) 6.25%

C) 6.75%

D) 6.00% 

Answer: B 

Explanation: The RBI recently reduced the repo rate by 25 basis points to 6.25%.

Q3. What is the primary purpose of adjusting the repo rate?

A) To control the supply of money in the economy

B) To regulate foreign exchange rates

C) To manage the government's fiscal deficit

D) To control the stock market

Answer: A 

Explanation: Adjusting the repo rate helps the RBI control the money supply in the economy, thereby managing inflation and economic growth.

Q4. How does a decrease in the repo rate affect the economy?

A) It makes borrowing more expensive

B) It makes borrowing cheaper

C) It has no impact on borrowing costs

D) It only affects foreign investors

Answer: B 

Explanation: A decrease in the repo rate lowers the cost of borrowing for commercial banks, which can lead to reduced interest rates for consumers and businesses, encouraging spending and investment.

Q5. Which body within the RBI is responsible for setting the repo rate?

A) Central Board of Directors

B) Monetary Policy Committee (MPC)

C) Financial Stability and Development Council

D) Economic Advisory Council

Answer: B 

Explanation: The Monetary Policy Committee (MPC) of the RBI is responsible for setting the repo rate. The MPC was set up in 2016 under the RBI Act (Amendment) 2016 to make monetary policy decisions more transparent.

Q6. What is the reverse repo rate?

A) The rate at which the RBI lends to commercial banks

B) The rate at which commercial banks lend to the RBI

C) The rate at which the government borrows from the RBI

D) The rate at which the RBI lends to the government

Answer: B

Explanation: The reverse repo rate is the rate at which the Reserve Bank of India borrows money from commercial banks within the country.

Q7. How does an increase in the repo rate impact inflation?

A) It increases inflation

B) It decreases inflation

C) It does not affect inflation

D) It only affects core inflation

Answer: B 

Explanation: An increase in the repo rate makes borrowing more expensive, which can reduce spending and investment, thereby helping to control inflation.

Q8. What is the Cash Reserve Ratio (CRR)?

A) The percentage of deposits that banks must keep as cash with the RBI

B) The interest rate charged by banks on loans

C) The total amount of loans given by a bank

D) The rate at which the RBI lends to commercial banks

Answer: A 

Explanation: The Cash Reserve Ratio (CRR) is the percentage of a bank's total deposits that must be maintained with the Reserve Bank of India in the form of liquid cash.

Q10. Which of the following is a qualitative tool of monetary policy?

A) Repo Rate

B) Open Market Operations

C) Moral Suasion

D) Cash Reserve Ratio

Answer: C

Explanation: Moral suasion is a qualitative tool where the RBI persuades banks to adhere to its policies.

Also read: GK Questions With Answers On Union Budget