Statement: In its first 60-day policy review, the Reserve Bank has decided to reduce the repo rate by 25 basis points and take measures to ease the liquidity constraints in the banking system.

Which of the following negates the above steps taken by the Reserve Bank?

  1. Loans and Installments will become cheaper for retail loans.
  2. Banks will pay higher interest rates on Fixed Deposits and Recurring Deposits.
  3. Banks will have to deposit more money with the Reserve Bank.
  4. The national currency will strengthen against other currencies.
  5. None of the above



If the repo rate goes down, loan rates will go down. In turn, deposit rates will also go down. Thus, B negates the given statement.


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