Repo vs reverse repo – I keep swapping them in MCQs
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Accepted answer
I wrote it from the bank's side: repo is when the bank borrows rupees from RBI against securities (injection of liquidity). Reverse repo is the bank parking funds with RBI (absorption). Then I added SDF and MSF as separate lines with 'who can use it' rather than cramming them into one sentence. When in doubt I ask 'who is getting rupees right now?'
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This is embarrassing because it's basic: I still pause on whether repo is RBI lending to banks or the other way round when the option wording is slightly changed. Standing deposit facility / MSF also crowd the same page in my notes.
How have you written this down so it survives a twisted prelims option?
How have you written this down so it survives a twisted prelims option?
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the 'who is getting rupees' question is simple and it works. thanks
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Rewrote the page that way. I'll test myself tomorrow without looking.