Question

Match List-I with List-II:

List-I		List-II
A	Bank Rate	(I)	Securities are pledged in order to repurchase
B	Marginal Standing Facility	(II)	Minimum rate at which funds are provided for long term
C	Repo Rate	(III)	Also known as Penal Interest Rate
D	Reverse Repo Rate	(IV)	Central Bank borrows funds from commercial banks

• (A) - (I), (B) - (II), (C) - (III), (D) - (IV)
• (A) - (II), (B) - (III), (C) - (I), (D) - (IV)
• (A) - (I), (B) - (II), (C) - (IV), (D) - (III)
• (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Answer 1

The Correct Option is D

To correctly match List-I with List-II, the definitions and concepts of each term in List-I must be understood:

1. Bank Rate: Also referred to as the Penal Interest Rate. The bank rate is the rate at which a nation's central bank lends funds to domestic banks. The corresponding match from List-II is (III) Also known as Penal Interest Rate.
2. Marginal Standing Facility (MSF): This facility enables commercial banks to secure overnight loans from the central bank when inter-bank liquidity is entirely depleted. In such scenarios, the central bank obtains funds from commercial banks. The corresponding match from List-II is (IV) Central Bank borrows funds from commercial banks.
3. Repo Rate: The repo rate is the rate applied when securities are pledged with the central bank for repurchase at a later date. It is predominantly employed for short-term borrowing and liquidity management. The corresponding match from List-II is (I) Securities are pledged in order to repurchase.
4. Reverse Repo Rate: This is the rate at which the central bank borrows from commercial banks for short durations. Its primary function is to manage excess liquidity within the banking system. The corresponding match from List-II is (II) Minimum rate at which funds are provided for long term.

Therefore, the correct pairing is: (A) - (III), (B) - (IV), (C) - (I), (D) - (II)