Explanation:

Bank Rate

• The rate at which RBI offers long-term loan to the banks is called Bank rate or Discount Rate. The central bank uses the bank rate to manage and control the credit scenario of the country leading to a betterment of the national economy as well as the banking sector. The bank rate has a direct effect on the interest rates of the loans offered by commercial banks. The higher the bank rate is, the more will be the lending rate of the banks as the banks tend to make profits by borrowing funds at low rates and then lending the money at high interest rates.

• As of now, RBI is not using MSF as monetary management as now it is 6.00% p.a. which is same as the repo rate.

• In case of default in maintenance of CRR requirement on daily basis, which is presently 70 per cent of the total CRR requirement, penal interest will be recovered for that day at the rate of three per cent per annum above the bank rate on the amount by which the amount actually maintained falls short of the prescribed minimum on that day and if short fall continues on the next succeeding days, penal interest will be recovered at a rate of five per cent per annum above the bank rate.

Hence option 1st is correct.