UPSC Prelims / Economy

Monetary policy sample question

Read the question, answer, option analysis and revision tip before taking a timed mock.

By Sarkari Engine Editorial DeskLast updated 20 July 2026Reviewed for independent exam-practice use

Question

Repo rate refers to the rate at which:

  1. A. Banks lend to customers
  2. B. RBI lends to commercial banks
  3. C. Customers lend to RBI
  4. D. Government taxes exports

Correct answer

Option B: RBI lends to commercial banks

Repo rate is the rate at which the Reserve Bank of India lends short-term funds to commercial banks against eligible securities. It is an important monetary policy tool.

Why the other options are wrong

  • Banks lending to customers refers to lending rates charged by banks, not repo rate.
  • Customers do not lend to RBI in this context.
  • Export taxation is a fiscal or trade policy matter, not repo rate.

Practice tip

For economy terms, write who acts on whom: RBI to banks, banks to customers, or government to taxpayers.

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