Q. The term ‘Variable Rate Reverse Repo (VRRR)’ operations conducted by the Reserve Bank of India (RBI) is best described by which of the following statements?

[A] It is a short-term borrowing tool used by banks to raise funds from the RBI at a fixed rate.

[B] It is a tool under RBI’s Liquidity Adjustment Facility used to inject additional liquidity into the banking system at a variable rate.

[C] It is a short-term tool under RBI’s Liquidity Adjustment Facility used to absorb surplus liquidity at market-determined rates.

[D] It is a long-term lending facility that provides banks with low-cost funds for priority sector lending.

Answer: C
Notes:

Explanation: The Variable Rate Reverse Repo (VRRR) is used by the RBI to absorb excess liquidity from the banking system through auctions conducted at variable rates, helping manage short-term interest rate movements and maintain monetary stability.

Source- newsonair

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