Economics · Monetary Policy

If the central bank increases the Reverse Repo Rate, what is the most likely reaction from commercial banks?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1Banks will increase the supply of credit to the retail sector
2Banks will reduce the interest rates offered on savings accounts
3Banks will find it more profitable to park their excess funds with the central bank✓
4Banks will borrow more money from the central bank

Correct answer

Banks will find it more profitable to park their excess funds with the central bank

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