- Statement 1: Repo Rate is typically more than Reverse Repo Rate in India. The Monetary Policy Committee sets a policy repo rate, and the reverse repo rate is usually kept below the repo rate, often forming a corridor. Thus, statement 1 is incorrect. - Statement 2: Bank Rate is generally more than Repo Rate in India. The Bank Rate often serves as a penal rate or is linked to the marginal standing facility (MSF) rate, which is typically higher than the policy repo rate. Thus, statement 2 is correct. - Statement 3: Cash Reserve Ratio (CRR) is a percentage of deposits that banks must hold with RBI. While CRR is a percentage requirement, not an interest rate, its numerical value as a percentage is typically less than the Repo Rate percentage. For example, if CRR is 4% and Repo Rate is 6%, CRR is less than Repo Rate. Thus, statement 3 is generally correct in terms of the numerical value of the percentage.
Which of the following statements are correct? 1. Repo Rate is less than Reverse Repo Rate in India. 2. Bank Rate is more than Repo Rate in India. 3. Cash Reserve Ratio is less than Repo Rate in India.
Asked in GPSC Prelims CSP 2 2021 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
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