Assertion (A): A rise in the reverse repo rate tends to reduce bank lending to the public.
Reason (R): Banks earn more by parking funds with the RBI, so they have less reason to lend those funds to the public.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Parking with the RBI becomes more attractive than lending. R explains A.

Concept: Reverse repo and lending
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsRepo, reverse repo and bank rate

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Assertion (A): A rise in the reverse repo rate tends to reduce bank lending to the public.Reason (R): Banks earn more by parking funds with the RBI, so they have less reason to lend those funds to the public.

Explanation

Assertion (A): A rise in the reverse repo rate tends to reduce bank lending to the public.
Reason (R): Banks earn more by parking funds with the RBI, so they have less reason to lend those funds to the public.