In Indian banking operations, at which of the following rates does the Reserve Bank of India (RBI) borrow money from commercial banks?

Introduction / Context:
This question is from monetary policy and basic banking concepts. The Reserve Bank of India (RBI) interacts with commercial banks through various policy rates that influence liquidity and interest rates in the economy. Understanding the difference between repo rate, reverse repo rate, bank rate, and statutory ratios is crucial for banking exams and general awareness. The key idea here is to identify the rate at which RBI borrows funds from commercial banks, rather than the other way around.

Given Data / Assumptions:
We are asked: at which rate does RBI borrow money from commercial banks? The options are:

• Bank Rate
• Repo Rate
• Reverse Repo Rate
• Statutory Liquidity Rate

We assume that the learner knows that repo transactions involve RBI lending to banks, while reverse repo transactions involve RBI taking funds from banks, using government securities as collateral.

Concept / Approach:
In a repo (repurchase) transaction, commercial banks borrow funds from RBI by selling government securities to RBI with an agreement to repurchase them later; the interest rate applied is called the repo rate. In a reverse repo transaction, the opposite happens: RBI borrows money from commercial banks by selling them securities with an agreement to buy them back, and the interest paid to banks is the reverse repo rate. The bank rate is a longer term rate related to certain lending from RBI to banks, and the statutory liquidity ratio (often abbreviated SLR, not “Statutory Liquidity Rate”) is a requirement for banks to maintain certain liquid assets, not an interest rate. Therefore, the rate at which RBI borrows from banks is the reverse repo rate.

Step-by-Step Solution:
Step 1: Recall that repo rate is the rate at which RBI lends short term funds to commercial banks against government securities. Step 2: Recall that reverse repo rate is the rate at which RBI borrows funds from commercial banks, again using government securities in the opposite direction. Step 3: Note that the question specifically asks about RBI borrowing from banks, not lending to them. Step 4: Recognise that bank rate is a different policy rate and that SLR is not even an interest rate but a ratio. Step 5: Conclude that the correct answer must be Reverse Repo Rate.

Verification / Alternative check:
To verify, remember standard textbook definitions: “Repo rate is the rate at which RBI lends to banks” and “Reverse repo rate is the rate at which RBI borrows from banks.” This pair of definitions is repeated in almost every banking awareness guide. The bank rate is typically used in the context of longer term lending and is somewhat less prominent in day to day liquidity management. The statutory liquidity ratio requires banks to maintain a certain percentage of their deposits in specified liquid assets and has no direct borrowing or lending direction attached to it. These consistent definitions confirm that reverse repo rate is correct.

Why Other Options Are Wrong:
Bank Rate: Refers to a lending rate at which RBI provides long term funds to banks; it is not specifically about RBI borrowing from banks.

Repo Rate: The rate at which RBI lends to commercial banks, the opposite direction of the transaction described in the question.

Statutory Liquidity Rate: This is a misleading phrase; the correct term is Statutory Liquidity Ratio (SLR), a regulatory ratio, not a rate at which borrowing or lending occurs.

Common Pitfalls:
Many candidates mix up repo and reverse repo because the names are similar and both involve RBI and government securities. A common mistake is to think repo rate covers all RBI–bank transactions, regardless of direction. To avoid this, remember a simple rule: repo (RBI lends, banks borrow), reverse repo (RBI borrows, banks lend). Keeping this pair in mind makes the question straightforward.

Final Answer:
The Reserve Bank of India borrows money from commercial banks at the Reverse Repo Rate.