🎯 CUET English 2025 | Reading Comprehension + Verbal Ability Practice | Repo Rate Editorial – The Hindu (10 April). Get Free PDF HERE.
🇮🇳 What is Repo Rate?
Repo Rate (short for Repurchase Rate) is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks in case of a short-term shortage of funds.
💡 In Simple Words:
👉 जब भारत के बैंकों को कुछ समय के लिए पैसों की ज़रूरत होती है,
वे RBI से उधार लेते हैं, और उस उधारी पर जो ब्याज (interest) लगता है,
उसे ही Repo Rate कहते हैं।
🏦 Why is Repo Rate Important?
- Controls Inflation
– अगर महंगाई ज़्यादा है, तो RBI Repo Rate बढ़ाता है ताकि बैंक महंगे रेट पर पैसे लें और लोन कम दें। इससे खर्च कम होता है और महंगाई कंट्रोल में आती है। - Boosts Growth
– जब अर्थव्यवस्था में मंदी होती है, तो RBI Repo Rate घटाता है ताकि बैंक सस्ते में लोन लें और लोगों को कम ब्याज पर लोन दें। इससे बाजार में पैसा बढ़ता है और आर्थिक गतिविधियाँ तेज होती हैं।
📊 Repo Rate Example (as of recent policy):
🔹 RBI Repo Rate = 6.50% (as per last MPC update)
If a bank borrows ₹1 crore from RBI, it will pay ₹6.5 lakh as interest annually.
🧠 Bonus Terms:
- Reverse Repo Rate: The rate at which RBI borrows money from banks.
- Monetary Policy Committee (MPC): The group that decides repo rate changes.
🎯 Conclusion:
The Repo Rate is a powerful tool used by the RBI to control inflation, regulate liquidity, and manage economic stability in India. Even small changes in the repo rate affect home loans, EMIs, and the cost of borrowing across the country.
🇮🇳 What is Repo Rate?
Repo Rate stands for Repurchase Rate. It is the interest rate at which the Reserve Bank of India (RBI) lends short-term money to commercial banks against government securities.
👉 The term ‘Repo’ means Repurchase Agreement—a deal in which banks sell government securities to RBI with an agreement to repurchase them later at a predetermined price.
🏦 Why Do Banks Borrow from RBI?
Commercial banks like SBI, HDFC, or ICICI often face temporary shortages of funds due to high demand for loans or withdrawals by customers. In such cases, they borrow money from the RBI to meet their day-to-day requirements. RBI lends money but charges interest on it — this interest is called the Repo Rate.
🔁 How Does It Work?
Let’s say a bank is short of ₹100 crore. It borrows this amount from RBI for a short term (usually overnight) and gives government securities worth ₹100 crore as collateral.
- If Repo Rate = 6.5%, then the bank will repay ₹106.5 crore at the end of the borrowing term.
- Later, it will repurchase the securities (hence, “Repurchase” Rate).
📈 How RBI Uses Repo Rate as a Tool
RBI uses Repo Rate to control liquidity, inflation, and growth in the economy:
1. 🔺 If RBI increases Repo Rate:
- Borrowing becomes costlier for banks.
- Banks raise interest on loans for customers (like home loans, car loans).
- Demand for loans decreases, reducing money flow in the economy.
- Helps control inflation (महंगाई).
2. 🔻 If RBI lowers Repo Rate:
- Borrowing becomes cheaper for banks.
- Banks reduce interest rates for customers.
- People borrow and spend more — boosts demand.
- Stimulates economic growth during slowdown.
📊 Current Repo Rate (As of April 2024):
- 6.50%
(Set by RBI’s Monetary Policy Committee – MPC)
🔄 Difference Between Repo Rate and Reverse Repo Rate
| Term | Meaning |
| Repo Rate | RBI lends money to banks |
| Reverse Repo Rate | RBI borrows money from banks (to absorb excess liquidity) |
🎯 Real-Life Impact of Repo Rate Changes
- If Repo Rate goes up:
- Your loan EMIs increase
- Business loans become costlier
- Investment and spending slow down
- If Repo Rate goes down:
- Your EMIs may reduce
- Boosts borrowing, real estate, vehicle sales, and business expansion
🧠 Who Decides Repo Rate?
The Monetary Policy Committee (MPC) of RBI reviews and sets the Repo Rate every two months. It comprises 6 members — 3 from RBI and 3 nominated by the Government of India.
✅ Summary:
- Repo Rate is a powerful monetary policy tool.
- It helps RBI to maintain a balance between inflation and growth.
- Changes in Repo Rate impact loan rates, EMIs, and liquidity in the entire economy.
📘 Reading Comprehension (10 MCQs)
Read the passage carefully and answer the following questions:
Q1. What is the new repo rate as per the RBI’s latest cut?
- a) 6.5%
b) 6.25%
c) 6%
d) 5.75%
✅ Answer: c) 6%
Q2. Why did the RBI cut the repo rate?
- a) To reduce inflation
b) To support growth and lower interest burden
c) To increase foreign exchange reserves
d) To control rising exports
✅ Answer: b) To support growth and lower interest burden
Q3. What global issue prompted the repo rate cut?
- a) War in Europe
b) U.S. interest rate hikes
c) Global trade war triggered by U.S. tariffs
d) Oil price hikes
✅ Answer: c) Global trade war triggered by U.S. tariffs
Q4. What was the previous GDP growth forecast before it was revised?
- a) 7.5%
b) 6.7%
c) 6.3%
d) 6.0%
✅ Answer: b) 6.7%
Q5. What does the article suggest will also be affected by the repo rate cut?
- a) Export volumes
b) Interest on savings
c) Gold prices
d) Inflation rate
✅ Answer: b) Interest on savings
Q6. Which committee is responsible for deciding the repo rate?
- a) Economic Advisory Council
b) Financial Planning Committee
c) Monetary Policy Committee
d) Fiscal Review Committee
✅ Answer: c) Monetary Policy Committee
Q7. What kind of policy stance did the RBI adopt?
- a) Neutral
b) Restrictive
c) Accommodative
d) Aggressive
✅ Answer: c) Accommodative
Q8. According to Mr. Malhotra, what may lead to imported inflation?
- a) Increased imports
b) Decrease in foreign reserves
c) Currency pressure and global uncertainties
d) Gold demand
✅ Answer: c) Currency pressure and global uncertainties
Q9. Which of the following is not mentioned as a factor affecting inflation?
- a) Crude oil prices
b) Food subsidies
c) Tariffs
d) Currency pressure
✅ Answer: b) Food subsidies
Q10. What does the term “Credit cushion” in the article refer to?
- a) RBI reducing credit card interest
b) RBI offering free loans to banks
c) RBI offering funds at lower repo rate
d) RBI increasing CRR
✅ Answer: c) RBI offering funds at lower repo rate
🟩 Vocabulary: Synonyms & Antonyms (10 MCQs)
| Word | Synonym (MCQ) | Antonym (MCQ) |
| Slash | a) Cut 🔥 b) Increase c) Create d) Slide | a) Raise 🔥 b) Fall c) Press d) Slice |
| Trim | a) Reduce 🔥 b) Add c) Paint d) Price | a) Add 🔥 b) Decrease c) Inflate d) Supply |
| Cushion | a) Support 🔥 b) Attack c) Crash d) Crack | a) Hurt 🔥 b) Relax c) Aid d) Save |
| Escalating | a) Rising 🔥 b) Shrinking c) Cooling d) Lowering | a) Decreasing 🔥 b) Rising c) Moving d) Enhancing |
| Dent | a) Damage 🔥 b) Shine c) Polish d) Add | a) Repair 🔥 b) Crack c) Break d) Point |
| Tariffs | a) Duties 🔥 b) Imports c) Subsidy d) Cost | a) Subsidies 🔥 b) Charges c) Taxes d) Rent |
| Triggered | a) Caused 🔥 b) Stopped c) Ended d) Halted | a) Prevented 🔥 b) Started c) Occurred d) Fueled |
| Impede | a) Block 🔥 b) Allow c) Push d) Drive | a) Facilitate 🔥 b) Hinder c) Pause d) Clutch |
| Quantification | a) Measurement 🔥 b) Estimation c) Expression d) Flow | a) Vague 🔥 b) Count c) Data d) Metric |
| Pressures | a) Strain 🔥 b) Comfort c) Peace d) Calm | a) Relief 🔥 b) Demand c) Intensity d) Power |
📝 Sentence Correction (5 MCQs)
Q1. The RBI have reduced the repo rate to support the economy.
- a) No error
b) has reduced
c) have been reducing
d) has been reducing
✅ Answer: b) has reduced
Q2. This is the second time RBI is cutting rates by 0.25%.
- a) had cut
b) has cut
c) is cutting
d) will cut
✅ Answer: b) has cut
Q3. The inflation could reduce due to slowdown in crude oil price.
- a) slow down in crude oil price
b) slowdown in crude oil prices
c) slows down crude oil price
d) slow down crude oil prices
✅ Answer: b) slowdown in crude oil prices
Q4. Several known unknowns makes the situation difficult.
- a) make the situation difficult
b) makes situation difficult
c) make situation difficult
d) made situation difficult
✅ Answer: a) make the situation difficult
Q5. The committee were unanimous in its decision.
- a) is unanimous
b) was unanimous
c) were unanimous in their
d) are unanimous in its
✅ Answer: b) was unanimous
🧠 Grammar – Verbal Reasoning / Analogy / Others (10 MCQs)
Q1. RBI : Interest rate :: RBI : ?
- a) Government
b) Inflation
c) Monetary policy 🔥
d) Tax
✅ Answer: c) Monetary policy
Q2. Stimulate : Boost :: Impede : ?
- a) Halt
b) Block 🔥
c) Promote
d) Facilitate
✅ Answer: b) Block
Q3. Inflation is to Price as Unemployment is to ?
- a) People
b) Jobs 🔥
c) Salary
d) Growth
✅ Answer: b) Jobs
Q4. Select the grammatically correct sentence:
- a) RBI have announced its decision.
b) RBI has announced its decision. 🔥
c) RBI had announce its decision.
d) RBI is announce its decision.
✅ Answer: b) RBI has announced its decision.
Q5. The opposite of “Accommodative” in context of monetary policy is:
- a) Restrictive 🔥
b) Neutral
c) Cooperative
d) Defensive
✅ Answer: a) Restrictive
Q6. Which phrase best replaces: “geared towards stimulating”?
- a) Avoiding growth
b) Not focused
c) Designed to promote 🔥
d) Likely to stop
✅ Answer: c) Designed to promote
Q7. Spot the correct analogy:
Tariffs : Trade :: Repo Rate : ?
a) Export
b) Loans 🔥
c) Imports
d) Currency
✅ Answer: b) Loans
Q8. What is the full form of MPC?
- a) Monetary Planning Committee
b) Monetary Policy Commission
c) Monetary Policy Committee 🔥
d) Money Policy Council
✅ Answer: c) Monetary Policy Committee
Q9. RBI increases repo rate → EMIs: ?
- a) Decrease
b) Stop
c) Increase 🔥
d) No effect
✅ Answer: c) Increase
Q10. Identify the correctly punctuated sentence:
- a) RBI cut the rate, however it may still increase inflation.
b) RBI cut the rate however, it may still increase inflation.
c) RBI cut the rate; however, it may still increase inflation. 🔥
d) RBI cut the rate however it, may still increase inflation.
✅ Answer: c) RBI cut the rate; however, it may still increase inflation.
