Q. With reference to Repo Rate, consider the following statements:
1.The Bank rate is always kept higher than the Repo Rate..
2.The government securities kept under Statutory Liquidity Ratio cannot be pledged against the money taken under Repo Rate facility.
Which of the statements given above is/are correct?
Answer: C
Notes:
Both statements are correct.
- As no collateral (or security) is pledged by the bank when borrowing from RBI under bank rate so bank rate is always kept higher than Repo Rate. This way banks are encouraged to borrow under Repo rate
- Under SLR a bank has to keep a certain percentage of its deposits in the form of g-sec also? This g-sec cannot be pledged against the money taken under Repo Rate.
Source: Article
