The Reserve Bank of India (RBI) conducts monetary policy under the statutory framework of the Reserve Bank of India Act, 1934, amended in 2016 to introduce the Monetary Policy Committee (MPC) under Section 45ZB. The primary objective is maintaining price stability while sustaining economic growth. Quantitative instruments regulate the volume of credit in the financial system. The policy repo rate represents the benchmark interest rate at which commercial banks borrow liquidity from the central bank against eligible government securities under the Liquidity Adjustment Facility (LAF). In April 2022, the RBI institutionalised the Standing Deposit Facility (SDF) under Section 17(1A) at 25 basis points below the repo rate, allowing absorption of surplus liquidity without collateral. The Marginal Standing Facility (MSF) provides penal overnight borrowing at 25 basis points above the repo rate. The Cash Reserve Ratio (CRR), mandated under Section 42(1), specifies the proportion of Net Demand and Time Liabilities (NDTL) held as cash with the central bank. Statutory Liquidity Ratio (SLR), enforced under Section 24 of the Banking Regulation Act, 1949, obligates banks to maintain unencumbered reserves in gold, cash, or approved government securities.
High-yield conceptual summaries for competitive exams and rapid revision.
Section 45ZB of the RBI Act, 1934 constitutes the six-member Monetary Policy Committee with equal representation from RBI and the Central Government.
The Repo Rate serves as the primary policy rate; the LAF corridor operates with Standing Deposit Facility (SDF) as the floor and Marginal Standing Facility (MSF) as the ceiling.
Cash Reserve Ratio (CRR) is maintained under Section 42(1) of the RBI Act without any statutory minimum or maximum ceiling since the 2006 amendment.
Statutory Liquidity Ratio (SLR) is prescribed under Section 24 of the Banking Regulation Act, 1949, with a legal ceiling capped at 40% of NDTL.
Open Market Operations (OMO) involve outright sale and purchase of government securities to adjust durable structural liquidity in the banking system.
Showing 25 Curated Questions51 Total in Bank
1ID: GK-BANK-00199
easyFinancial Terms, Money Markets & Capital Instruments
In the asymmetric Liquidity Adjustment Facility (LAF) corridor of the Reserve Bank of India, what is the fixed spread of the Standing Deposit Facility (SDF) rate relative to the Policy Repo Rate?
Verified Explanation
In the LAF corridor, the Policy Repo Rate sits in the middle, the Marginal Standing Facility (MSF) rate is set at Repo + 25 bps as the ceiling, and the Standing Deposit Facility (SDF) rate is set at Repo - 25 bps as the floor.
2ID: GK-BANK-00546
easyCommercial Banks, Payment Banks & SFBs
In the operating framework of the Reserve Bank of India, what is the 'Repo Rate'?
Verified Explanation
The Repo Rate (Repurchase Option Rate) is the policy interest rate at which the Reserve Bank of India lends short-term money to commercial banks against eligible collateral (government and other approved securities) under the Liquidity Adjustment Facility (LAF).
3ID: GK-BANK-00052
hardFinancial Terms, Money Markets & Capital Instruments
What is the statutory spread between the Standing Deposit Facility (SDF) rate and the Marginal Standing Facility (MSF) rate around the Policy Repo Rate in RBI's asymmetric LAF corridor?
Verified Explanation
In April 2022, RBI restored the 50 bps Liquidity Adjustment Facility (LAF) corridor: SDF rate is 25 bps below the policy repo rate (floor), and MSF rate is 25 bps above the repo rate (ceiling).
4ID: GK-ECON-00596
easyBanking & RBI
In monetary policy, what is the 'Repo Rate' defined as by the Reserve Bank of India?
Verified Explanation
Repo (Repurchase Option) rate is the benchmark policy rate at which the RBI provides liquidity to scheduled commercial banks against approved government securities.
5ID: GK-ECON-00611
mediumBanking & RBI
The Monetary Policy Committee (MPC) of the Reserve Bank of India, responsible for fixing the benchmark policy repo rate, consists of how many total members?
Verified Explanation
Under Section 45ZB of the amended RBI Act 1934, the MPC consists of 6 members: the RBI Governor (Chairperson), Deputy Governor in charge of monetary policy, one RBI officer, and 3 external experts appointed by the Central Government.
6ID: GK-BANK-00002
mediumCommercial Banks, Payment Banks & SFBs
What rate of interest does the Reserve Bank of India charge when commercial banks borrow funds overnight against eligible government securities under the Liquidity Adjustment Facility (LAF)?
Verified Explanation
Repo Rate (Repurchase Option Rate) is the policy interest rate at which the RBI lends money to commercial banks against pledged government securities under the Liquidity Adjustment Facility.
7ID: GK-BANK-00232
hardFinancial Terms, Money Markets & Capital Instruments
Under the External Benchmark Based Lending Rate (EBLR) framework mandated by the RBI in 2019, which external benchmarks are banks permitted to choose from to link their floating rate retail and MSME loans?
Verified Explanation
Under the EBLR framework, banks can choose any of the following: (a) RBI Policy Repo Rate, (b) 91-day T-Bill yield, (c) 182-day T-Bill yield, or (d) Any other benchmark market interest rate produced by FBIL.
8ID: GK-BANK-00427
easyCommercial Banks, Payment Banks & SFBs
Which rate refers to the interest rate at which commercial banks borrow overnight funds from the RBI against government securities under the Liquidity Adjustment Facility (LAF)?
Verified Explanation
The Repo Rate (Repurchase Option rate) is the key policy interest rate at which the RBI lends short-term money to commercial banks against the collateral of approved government securities.
9ID: GK-BANK-00490
easyCommercial Banks, Payment Banks & SFBs
What is the policy interest rate at which the Reserve Bank of India absorbs liquidity from commercial banks against approved collateral under the Liquidity Adjustment Facility (LAF)?
Verified Explanation
The Reverse Repo Rate is the fixed interest rate at which the RBI absorbs overnight liquidity from eligible commercial banks against the collateral of eligible government securities under the Liquidity Adjustment Facility.
10ID: GK-BANK-00561
mediumCommercial Banks, Payment Banks & SFBs
Under RBI directives effective October 1, 2019, all new floating rate retail loans and MSME loans extended by commercial banks must be linked to what pricing mechanism?
Verified Explanation
RBI mandated all commercial banks to link all new floating rate personal, housing, auto, and MSME loans to an External Benchmark Lending Rate (such as RBI Repo Rate or Government Treasury Bill yields) to ensure faster monetary transmission.
11ID: GK-ECON-00242
hardBanking & RBI
The 'Standing Deposit Facility' (SDF) introduced by the RBI in April 2022 serves what distinct operational function compared to the Reverse Repo rate?
Verified Explanation
SDF is an uncollateralized monetary policy tool empowering the RBI to absorb excess liquidity from the banking system without giving government securities in return, strengthening liquidity management.
12ID: GK-ECON-00431
mediumBanking & RBI
How many total members constitute the Monetary Policy Committee (MPC) of India responsible for fixing the benchmark policy repo rate?
Verified Explanation
Under Section 45ZB of the amended RBI Act 1934, the MPC consists of 6 members: 3 from the RBI (including the Governor as Chairperson) and 3 external experts appointed by the Central Government.
13ID: GK-BANK-00328
hardFinancial Terms, Money Markets & Capital Instruments
Under the External Benchmark Lending Rate (EBLR) regime mandated by the RBI effective 1 October 2019, which of the following is NOT an approved external benchmark?
Verified Explanation
Under EBLR rules, banks must link floating rate personal/retail/MSME loans to an external market benchmark (RBI Repo Rate, 3M T-Bill, 6M T-Bill, or other FBIL benchmarks). Internal benchmarks like MCLR/Base Rate are prohibited.
14ID: GK-BANK-00390
hardFinancial Terms, Money Markets & Capital Instruments
Under the RBI's Liquidity Management Framework, what fine-tuning variable rate auctions are deployed to absorb temporary frictional liquidity from the banking system?
Verified Explanation
Variable Rate Reverse Repo (VRRR) auctions of various tenors (e.g., 14-day, 7-day, 28-day) are conducted by the RBI as the primary liquidity absorption tool under the revised operating framework.
15ID: GK-BANK-00009
easyRBI Functions, Repo Rates & Monetary Policy
How many total members constitute India's Monetary Policy Committee (MPC) responsible for setting the benchmark policy interest rate?
Verified Explanation
The Monetary Policy Committee (MPC) consists of 6 members: 3 from the Reserve Bank of India (including the Governor as Chairperson) and 3 external members appointed by the Central Government.
16ID: GK-BANK-00166
hardRBI Functions, Repo Rates & Monetary Policy
Under the RBI's IRAC provisioning guidelines, what is the mandatory provisioning rate on the secured portion of a Doubtful Asset that has remained in Doubtful Category 2 (D2) for 1 to 3 years?
Verified Explanation
For Doubtful assets, provisioning on the secured portion is 25% for up to one year (D1), 40% for one to three years (D2), and 100% for more than three years (D3).
17ID: GK-BANK-00300
hardRBI Functions, Repo Rates & Monetary Policy
Under the RBI Master Direction on Digital Lending (2022), what mandatory document disclosing the Annual Percentage Rate (APR), recovery mechanisms, and grievance redressal must be provided to a borrower before loan execution?
Verified Explanation
Under the Digital Lending Guidelines, Regulated Entities (REs) must provide a standardized Key Fact Statement (KFS) in plain language to the borrower before executing any digital loan contract, detailing all charges, APR, and cooling-off period.
18ID: GK-BANK-00487
easyRBI Functions, Repo Rates & Monetary Policy
How many total members constitute the Monetary Policy Committee (MPC) of India?
Verified Explanation
Under Section 45ZB of the amended RBI Act, 1934, the Monetary Policy Committee consists of 6 members: 3 from the RBI (Governor, Deputy Governor in-charge of monetary policy, one internal officer) and 3 external members nominated by the Central Government.
19ID: GK-ECON-00485
easyBanking & RBI
What is the interest rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities called?
Verified Explanation
Repo Rate (Repurchase Option rate) is the key policy interest rate at which the RBI lends money to commercial banks against eligible collateral.
20ID: GK-BANK-00048
hardFinancial Terms, Money Markets & Capital Instruments
Effective 1 October 2019, which external benchmark was mandated by the RBI for banks to link all new floating-rate personal/retail and MSME loans?
Verified Explanation
To ensure fast and transparent monetary transmission, RBI mandated banks to link all new floating rate personal, retail housing, and MSME loans to External Benchmark Lending Rates (EBLR) from 1 October 2019.
21ID: GK-BANK-00270
mediumFinancial Terms, Money Markets & Capital Instruments
In the operating monetary policy framework of the Reserve Bank of India, which facility serves as the floor of the Liquidity Adjustment Facility (LAF) corridor for uncollateralized absorption of liquidity?
Verified Explanation
Effective from April 2022, the Standing Deposit Facility (SDF) replaced the fixed-rate reverse repo as the floor of the LAF corridor (set 25 bps below the policy repo rate) for uncollateralized liquidity absorption.
22ID: GK-BANK-00368
easyFinancial Terms, Money Markets & Capital Instruments
Under the revised Liquidity Adjustment Facility (LAF) framework introduced in 2022, which uncollateralised facility serves as the floor of the LAF corridor?
Verified Explanation
In April 2022, the RBI introduced the Standing Deposit Facility (SDF) at 25 bps below the policy repo rate as the uncollateralised floor of the LAF corridor to absorb surplus liquidity without pledging government securities.
23ID: GK-BANK-00434
mediumCommercial Banks, Payment Banks & SFBs
Which liquidity management tool introduced by the RBI in April 2022 allows it to absorb surplus liquidity from commercial banks on an uncollateralised basis (without pledging government securities)?
Verified Explanation
The Standing Deposit Facility (SDF) was operationalised by RBI in April 2022 as the floor of the LAF corridor at 25 bps below the policy repo rate. Unlike reverse repo, SDF does not require collateral of government securities.
24ID: GK-BANK-00099
easyCommercial Banks, Payment Banks & SFBs
What is the overnight penal borrowing window introduced by the RBI in 2011 through which commercial banks can borrow funds above their normal repo quota against their SLR portfolio?
Verified Explanation
The Marginal Standing Facility (MSF) is an overnight liquidity window introduced in 2011 enabling scheduled banks to borrow emergency funds up to a specified limit of their NDTL by dipping into their SLR quota at a penal rate.
25ID: GK-BANK-00318
mediumFinancial Terms, Money Markets & Capital Instruments
What fine-tuning liquidity management tool is deployed by the RBI under the Liquidity Adjustment Facility (LAF) to absorb surplus liquidity of varying tenors from the banking system?
Verified Explanation
VRRR auctions are discretionary liquidity absorption tools used by RBI under LAF for tenors ranging from overnight to 14 days or more to manage banking system liquidity.