Which of the following are long term policy tools 1 Repo Rate 2 Revers...........

Economic Affairs Money Supply and Monetary Policy

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Which of the following are long term policy tools?

1. Repo Rate

2. Reverse Repo Rate

3. Bank Rate

4. Marginal Standing Facility Rate

Select the correct answer using the codes given below:

1, 3 and 4 only

3 only

1 and 2 only

2, 3 and 4 only

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Explanation:

Bank Rate: When banks borrow long term funds from RBI. They’ve to pay this much interest rate to RBI. This is the re-discounting rate that RBI extends to banks against securities such as bills of exchange, commercial papers and any other approved securities. In recent years, it has been the repo rather than the bank rate that has acted as a guideline for banks to set their interest rates. It is currently at 8.25%. Directionally, bank rate follows repo.