Multiple choice

Reverse repo means

  1. injecting liquidity by the Central Bank of a country through purchase of Govt. securities

  2. absorption of liquidity from the market by sale of Govt. securities

  3. balancing liquidity with a view to enhancing economic growth rate

  4. improving the position of availability of the securities in the market

  5. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A reverse repo rate is the rate at which the central bank borrows money from commercial banks within the country. This involves the absorption of liquidity from the market, typically achieved by the central bank selling government securities to commercial banks.

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