This page covers IBPS PO RBI Policies & Rate Changes with complete concept notes, 22 graded practice MCQs, key points and exam-specific tips. Free to study.
Core ConceptRead this first — the foundation of the topic
TRICK
Reverse Repo = Repo Rate minus 0.25% (in normal corridor setup)
3. MARGINAL STANDING FACILITY (MSF) RATE — Emergency borrowing rate for banks. Always HIGHER than Repo Rate
TRICK
MSF = Repo Rate plus 0.25%
4. BANK RATE — Rate at which RBI lends long-term funds. Same as MSF Rate currently.
5. CRR (Cash Reserve Ratio) — Percentage of deposits banks must keep with RBI as CASH.
No interest paid on this
Formula
CRR Amount = (CRR% / 100) x Net Demand and Time Liabilities (NDTL)
6. SLR (Statutory Liquidity Ratio) — Percentage of deposits banks must keep in liquid assets (Gold, Govt. Securities, Cash). Banks earn interest on SLR assets
Key Difference
CRR = Cash only with RBI. SLR = Liquid assets with bank itself.
7. MSF Rate = Bank Rate = Repo Rate + 0.25%
Reverse Repo Rate = Repo Rate - 0.25%
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Formula BlockMemorise — at least one formula appears in every paper
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Rate Order (Low to High): Reverse Repo < Repo < MSF = Bank Rate
MSF Rate = Repo Rate + 0.25%
Reverse Repo Rate = Repo Rate - 0.25%
CRR Calculation: CRR Amount = CRR% x NDTL / 100
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Exam PatternsWhat examiners ask — read before attempting PYQs
— What Gets Asked
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IBPS PO exam asks 3 types of RBI rate questions:
Type 1 — Current rate values (e.g., What is the current Repo Rate?)
Type 2 — Rate relationships (e.g., MSF is always ___ than Repo Rate?)
Type 3 — Effect questions (e.g., When RBI increases Repo Rate, what happens to home loan EMIs?)
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ShortcutsUse these to save 30–60 seconds per question
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TRICK 1 — REMEMBER ORDER using sentence:
'Reverse Repo Rates Make Banks Stronger'
R = Reverse Repo (lowest), R = Repo, M = MSF, B = Bank Rate (equal to MSF)
TRICK 2 — Effect of Rate INCREASE:
Repo Rate UP → Loans costlier → People borrow less → Money supply DECREASES → Inflation FALLS
Repo Rate DOWN → Loans cheaper → People borrow more → Money supply INCREASES → Inflation RISES
TRICK 3 — CRR vs SLR in 5 seconds:
CRR = Cash only, kept with RBI, No Interest Earned
SLR = Gold + Govt Securities + Cash, kept with Bank, Interest Earned
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Worked ExampleSolve this step-by-step before moving on
Apply values.
MSF Rate = 6.50 + 0.25 = 6.75%
Reverse Repo Rate = 6.50 - 0.25 = 6.25%
Answer: MSF Rate = 6.75%, Reverse Repo Rate = 6.25%
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WORKED EXAMPLE 2
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Question: A bank has NDTL of Rs. 500 crore. CRR is 4%. How much cash must the bank keep with RBI?
1
Step 1
Use CRR Formula.
CRR Amount = (CRR% / 100) x NDTL
2
Step 2
Put values.
CRR Amount = (4 / 100) x 500 crore
CRR Amount = 0.04 x 500 = Rs. 20 crore
Answer: The bank must deposit Rs. 20 crore with RBI as CRR.
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Exam TrapsCommon mistakes students make — avoid these
— #1 TRAP IN EXAMS
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Students confuse BANK RATE and REPO RATE. They think both are the same. WRONG!
Repo Rate = Short-term lending rate (with repurchase agreement)
Bank Rate = Long-term lending rate (NO repurchase agreement)
But numerically, Bank Rate = MSF Rate = Repo Rate + 0.25%
Also, many students say 'CRR earns interest' — it does NOT.
Only SLR assets earn interest.
Key Points to Remember
Repo Rate = Rate at which RBI lends money to banks (short-term, with repurchase agreement)
Reverse Repo Rate = Rate at which RBI borrows from banks — always LOWER than Repo Rate
The Reserve Bank of India was established in 1935 as a private institution and was later nationalised. In which year was the RBI nationalised, and what is its headquarters location?
Practice 2medium
Which of the following best describes the Statutory Liquidity Ratio (SLR) and under which Act is it prescribed?
Practice 3medium
The Monetary Policy Committee (MPC) of the RBI is responsible for determining key policy rates. Which of the following correctly describes the composition and primary function of the MPC?
Practice 4medium
Under which section of the Banking Regulation Act, 1949, is the Cash Reserve Ratio (CRR) prescribed, and what does it require banks to maintain?
Practice 5medium
The Monetary Policy Committee (MPC) of the RBI comprises how many members, and how frequently does it meet to decide on policy rates?
Practice 6medium
Which of the following monetary policy tools is used by the RBI to absorb liquidity from the banking system?
Practice 7medium
The Reserve Bank of India was established in which year and nationalised in which year?
Practice 8medium
Which of the following is NOT a primary function of the Reserve Bank of India?
Practice 9medium
The Monetary Policy Committee (MPC) of the RBI comprises how many members, and what is its primary decision-making frequency?
Practice 10medium
Which of the following best describes the Statutory Liquidity Ratio (SLR) and under which Banking Act is it prescribed?
Practice 11hard
The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are two key liquidity management tools used by the RBI. Which of the following correctly distinguishes between CRR and SLR in terms of asset composition, holding location, and impact on the money multiplier?
Practice 12hard
The Monetary Policy Committee (MPC) of the RBI is responsible for determining the policy repo rate. Which of the following correctly describes the composition and decision-making framework of the MPC as per RBI Act 1934?
Practice 13hard
Under the Banking Regulation Act 1949, Section 24 mandates that banks maintain a Statutory Liquidity Ratio (SLR). In the context of RBI's transmission mechanism, which of the following best explains how a reduction in the SLR requirement by the RBI would impact the banking system?
Practice 14hard
Under the Banking Regulation Act 1949, which section empowers the RBI to prescribe the Statutory Liquidity Ratio (SLR) that banks must maintain?
Practice 15hard
The Monetary Policy Committee (MPC) of the RBI comprises how many members, and how frequently does it meet to decide on the policy repo rate?
Practice 16hard
Which of the following best describes the transmission mechanism of monetary policy, specifically how a reduction in the RBI's repo rate affects the broader economy?
Practice 17hard
The Marginal Standing Facility (MSF) rate is set at a specific spread above the repo rate. Which of the following correctly identifies the relationship between MSF rate and repo rate, and the primary purpose of MSF?
Practice 18hard
The RBI was established in 1935 and nationalized in 1949. Which of the following correctly identifies the primary function of RBI that distinguishes it from commercial banks and makes it the 'banker's bank'?
Practice 19hard
The Monetary Policy Committee (MPC) of the Reserve Bank of India is responsible for determining the policy repo rate. Which of the following correctly describes the composition and decision-making framework of the MPC as per RBI governance?
Practice 20hard
Under the Banking Regulation Act 1949, Section 24 prescribes the Statutory Liquidity Ratio (SLR) requirement for scheduled commercial banks. If the RBI sets the SLR at 18% of NDTL, which of the following statements is INCORRECT regarding SLR compliance and its impact on monetary transmission?
2 more practice questions in the Study Panel
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