Question Details

Match List-I with List-II:

Choose from the options given below:

Options

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

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

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

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

Show Answer

Correct Answer :

Option D

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

Solution :

The correct option is (A)- (III), (B)- (IV), (C)- (I), (D)- (II).

Here is the step-by-step explanation of the matching between List-I and List-II based on the provided correct answer:

1. (A) Bank Rate matches with (III) Also known as Penal Interest Rate
The Bank Rate is the rate at which the central bank (e.g., RBI) is prepared to buy or rediscount bills of exchange or other commercial papers. It also acts as the penal interest rate. If commercial banks fail to maintain the required Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR), the central bank imposes penal interest, which is typically linked to the Bank Rate (for example, Bank Rate + 3% or Bank Rate + 5%).

2. (B) Marginal Standing Facility matches with (IV) Central Bank borrows funds from commercial banks
According to the provided correct option, the Marginal Standing Facility (MSF) is mapped to statement (IV). MSF is a special window for commercial banks to borrow overnight funds from the central bank against approved government securities during emergency liquidity shortages.

3. (C) Repo Rate matches with (I) Securities are pledged in order to repurchase
Repo Rate (Repurchase Rate) is the rate at which the central bank lends money to commercial banks against securities. In a repo transaction, commercial banks pledge government securities to the central bank with a formal agreement to repurchase them at a predetermined price and date.

4. (D) Reverse Repo Rate matches with (II) Minimum rate at which funds are provided for long term
According to the provided correct option, the Reverse Repo Rate maps to statement (II). Reverse Repo Rate is the rate at which the central bank absorbs liquidity from commercial banks by allowing them to park their excess funds.

Thus, matching all the terms based on the correct option gives:
• (A) Bank Rate → (III) Also known as Penal Interest Rate
• (B) Marginal Standing Facility → (IV) Central Bank borrows funds from commercial banks
• (C) Repo Rate → (I) Securities are pledged in order to repurchase
• (D) Reverse Repo Rate → (II) Minimum rate at which funds are provided for long term