
February 09-10 2025 Current Affairs MCQs
[Quiz] Daily Prelims Practice Questions (PPQs) – February 09-10 2025
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These MCQs are based on PMF IAS Daily Current Affairs. The daily current affairs are uploaded every day by 8 PM. You can read the Daily Current Affairs from here. Subscribers of the “Current Affairs” course can Download Daily Current Affairs in PDF/DOC from here.
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Question 1 of 7
1. Question
Q1. {Envi – Conservation} Consider the following statements regarding nuclear power:
- It is the second-largest source of low-carbon electricity globally, after hydropower.
- In 2021, nuclear power contributed nearly 10% of the world’s total electricity production.
- Its greenhouse gas emissions per kilowatt-hour are lower than coal-fired electricity but higher than solar and wind power.
How many of the statements given above are correct?
Correct
Explanation
Statement 1 is correct
- It is the second largest source of low-carbon electricity production globally (after hydropower) and provided about 30% of all low-carbon electricity generated in 2019.
Statement 2 is correct
- Nuclear power accounted for 9.8% of total electricity production in 2021, a decrease of 0.4 percentage points from the previous year.
- The share of nuclear grew rapidly from 1980 to 1990, almost doubling, but has declined since 2000.
Statement 3 is incorrect
- It is the clean source of energy with a minimal carbon footprint.
- Greenhouse gas emissions are only in the range of 5 to 6 grams per kilowatt hour. This is 100 times lower than coal-fired electricity and about half the average of solar and wind generation.
Answer: (b) Only two; Difficulty Level: Medium
Incorrect
Explanation
Statement 1 is correct
- It is the second largest source of low-carbon electricity production globally (after hydropower) and provided about 30% of all low-carbon electricity generated in 2019.
Statement 2 is correct
- Nuclear power accounted for 9.8% of total electricity production in 2021, a decrease of 0.4 percentage points from the previous year.
- The share of nuclear grew rapidly from 1980 to 1990, almost doubling, but has declined since 2000.
Statement 3 is incorrect
- It is the clean source of energy with a minimal carbon footprint.
- Greenhouse gas emissions are only in the range of 5 to 6 grams per kilowatt hour. This is 100 times lower than coal-fired electricity and about half the average of solar and wind generation.
Answer: (b) Only two; Difficulty Level: Medium
Unattempted
Explanation
Statement 1 is correct
- It is the second largest source of low-carbon electricity production globally (after hydropower) and provided about 30% of all low-carbon electricity generated in 2019.
Statement 2 is correct
- Nuclear power accounted for 9.8% of total electricity production in 2021, a decrease of 0.4 percentage points from the previous year.
- The share of nuclear grew rapidly from 1980 to 1990, almost doubling, but has declined since 2000.
Statement 3 is incorrect
- It is the clean source of energy with a minimal carbon footprint.
- Greenhouse gas emissions are only in the range of 5 to 6 grams per kilowatt hour. This is 100 times lower than coal-fired electricity and about half the average of solar and wind generation.
Answer: (b) Only two; Difficulty Level: Medium
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Question 2 of 7
2. Question
Q2. {Infra – Railways} The Dedicated Freight Corridors (DFC) are railway tracks exclusively designed for freight, featuring double-stack container and heavy-haul trains, enhancing capacity and speed. In this context which of the following routes is not part of the Dedicated Freight Corridors?
Correct
Explanation
Option (d) is correct
- Dedicated Freight Corridor (DFC) are railway tracks exclusively designed for freight, featuring double-stack container and heavy-haul trains, enhancing capacity and speed.
- Foundation for EDFC and WDFC was laid in 2006. By 2024 three DFC stretches were inaugurated.
- Western Dedicated Freight Corridor (WDFC)
- 1,506 km long, from Jawaharlal Nehru Port, Mumbai to Dadri (UP), handling goods like textiles, chemicals, and industrial products.
- The WDFC covers Haryana, Rajasthan, Gujarat, Maharashtra & Uttar Pradesh.
- It is being funded by the Japan International Cooperation Agency.
- Eastern Dedicated Freight Corridor (EDFC)
- 1,337 km long, from Dankuni (West Bengal) to Sahnewal (Punjab), focusing on coal, steel, and agricultural products.
- The EDFC route covers Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand & West Bengal
- The EDFC route has coal mines, thermal power plants & industrial cities.
- Feeder routes are also being made for these.
- EDFC is being funded by the World Bank.
- Connecting Link for Eastern & Western Arm is under construction between Dadri & Khurja.
- The other four corridors:
- East coast corridor from Kharagpur to Vijayawada (1115 km);
- East-west sub-corridor-I from Palghar to Dankuni (2073 km);
- East-west Sub-corridor-II from Rajkharsawan to Andal (195 km); and
- North-south sub-corridor from Vijayawada to Itarsi (975 km).
Answer: (d) Bangalore to Chennai; Difficulty Level: Hard
Incorrect
Explanation
Option (d) is correct
- Dedicated Freight Corridor (DFC) are railway tracks exclusively designed for freight, featuring double-stack container and heavy-haul trains, enhancing capacity and speed.
- Foundation for EDFC and WDFC was laid in 2006. By 2024 three DFC stretches were inaugurated.
- Western Dedicated Freight Corridor (WDFC)
- 1,506 km long, from Jawaharlal Nehru Port, Mumbai to Dadri (UP), handling goods like textiles, chemicals, and industrial products.
- The WDFC covers Haryana, Rajasthan, Gujarat, Maharashtra & Uttar Pradesh.
- It is being funded by the Japan International Cooperation Agency.
- Eastern Dedicated Freight Corridor (EDFC)
- 1,337 km long, from Dankuni (West Bengal) to Sahnewal (Punjab), focusing on coal, steel, and agricultural products.
- The EDFC route covers Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand & West Bengal
- The EDFC route has coal mines, thermal power plants & industrial cities.
- Feeder routes are also being made for these.
- EDFC is being funded by the World Bank.
- Connecting Link for Eastern & Western Arm is under construction between Dadri & Khurja.
- The other four corridors:
- East coast corridor from Kharagpur to Vijayawada (1115 km);
- East-west sub-corridor-I from Palghar to Dankuni (2073 km);
- East-west Sub-corridor-II from Rajkharsawan to Andal (195 km); and
- North-south sub-corridor from Vijayawada to Itarsi (975 km).
Answer: (d) Bangalore to Chennai; Difficulty Level: Hard
Unattempted
Explanation
Option (d) is correct
- Dedicated Freight Corridor (DFC) are railway tracks exclusively designed for freight, featuring double-stack container and heavy-haul trains, enhancing capacity and speed.
- Foundation for EDFC and WDFC was laid in 2006. By 2024 three DFC stretches were inaugurated.
- Western Dedicated Freight Corridor (WDFC)
- 1,506 km long, from Jawaharlal Nehru Port, Mumbai to Dadri (UP), handling goods like textiles, chemicals, and industrial products.
- The WDFC covers Haryana, Rajasthan, Gujarat, Maharashtra & Uttar Pradesh.
- It is being funded by the Japan International Cooperation Agency.
- Eastern Dedicated Freight Corridor (EDFC)
- 1,337 km long, from Dankuni (West Bengal) to Sahnewal (Punjab), focusing on coal, steel, and agricultural products.
- The EDFC route covers Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand & West Bengal
- The EDFC route has coal mines, thermal power plants & industrial cities.
- Feeder routes are also being made for these.
- EDFC is being funded by the World Bank.
- Connecting Link for Eastern & Western Arm is under construction between Dadri & Khurja.
- The other four corridors:
- East coast corridor from Kharagpur to Vijayawada (1115 km);
- East-west sub-corridor-I from Palghar to Dankuni (2073 km);
- East-west Sub-corridor-II from Rajkharsawan to Andal (195 km); and
- North-south sub-corridor from Vijayawada to Itarsi (975 km).
Answer: (d) Bangalore to Chennai; Difficulty Level: Hard
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Question 3 of 7
3. Question
Q3. {Infra – Railways} Consider the following statements regarding Indian Railways:
- It is the fourth-largest railway network in the world, after the United States, Russia, and China.
- Over 97% of broad-gauge lines are electrified, showcasing Indian Railways’ commitment to sustainability.
- The Rail Infrastructure Development Fund (RIDF) was created to finance infrastructure, while the Rail Drishti Portal ensures transparency.
How many of the statements given above are correct?
Correct
Explanation
Statement 1 is correct
- Indian Railways, one of the largest and busiest railway networks in the world, plays a crucial role in the country’s economic and social development.
- With over 68,000 kilometers of track, it serves as the backbone of transportation for both passengers and freight across India.
- With over 68,000 km of track, Indian Railways is the 4th largest railway network globally, after the US, Russia, and China, making it a crucial backbone for national transport.
Statement 2 is correct
- 97% of broad-gauge lines are electrified, reflecting Indian Railways’ commitment to sustainability and reduced reliance on fossil fuels.
Statement 3 is correct
- The government introduced dynamic fare pricing and merged the Rail Budget with the Finance Budget for better integration.
- The Rail Infrastructure Development Fund (RIDF) was created to finance infrastructure, while the Rail Drishti Portal ensures transparency.
Answer: (c) All three; Difficulty Level: Medium
Incorrect
Explanation
Statement 1 is correct
- Indian Railways, one of the largest and busiest railway networks in the world, plays a crucial role in the country’s economic and social development.
- With over 68,000 kilometers of track, it serves as the backbone of transportation for both passengers and freight across India.
- With over 68,000 km of track, Indian Railways is the 4th largest railway network globally, after the US, Russia, and China, making it a crucial backbone for national transport.
Statement 2 is correct
- 97% of broad-gauge lines are electrified, reflecting Indian Railways’ commitment to sustainability and reduced reliance on fossil fuels.
Statement 3 is correct
- The government introduced dynamic fare pricing and merged the Rail Budget with the Finance Budget for better integration.
- The Rail Infrastructure Development Fund (RIDF) was created to finance infrastructure, while the Rail Drishti Portal ensures transparency.
Answer: (c) All three; Difficulty Level: Medium
Unattempted
Explanation
Statement 1 is correct
- Indian Railways, one of the largest and busiest railway networks in the world, plays a crucial role in the country’s economic and social development.
- With over 68,000 kilometers of track, it serves as the backbone of transportation for both passengers and freight across India.
- With over 68,000 km of track, Indian Railways is the 4th largest railway network globally, after the US, Russia, and China, making it a crucial backbone for national transport.
Statement 2 is correct
- 97% of broad-gauge lines are electrified, reflecting Indian Railways’ commitment to sustainability and reduced reliance on fossil fuels.
Statement 3 is correct
- The government introduced dynamic fare pricing and merged the Rail Budget with the Finance Budget for better integration.
- The Rail Infrastructure Development Fund (RIDF) was created to finance infrastructure, while the Rail Drishti Portal ensures transparency.
Answer: (c) All three; Difficulty Level: Medium
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Question 4 of 7
4. Question
Q4. {Polity – Bodies – Statutory} With reference to National Action for Mechanized Sanitation Ecosystem (NAMASTE) Scheme, consider the following statements:
- It is a joint initiative by the Ministry of Social Justice and Empowerment and the Ministry of Housing and Urban Affairs.
- It is a Centrally Sponsored Scheme launched in 2022.
Which of the statements given above is/are not correct?
Correct
Explanation
Statement 1 is correct
- National Action for Mechanized Sanitation Ecosystem (NAMASTE) Scheme is a joint initiative by the Ministry of Social Justice and Empowerment and the Ministry of Housing and Urban Affairs.
- It has replaced the Self-Employment Scheme for the Rehabilitation of Manual Scavengers (SRMS).
Statement 2 is incorrect
- It is a central sector scheme launched in 2022.
- It aims to eliminate the manual engagement of sanitation workers in hazardous tasks related to sewer and septic tank cleaning.
- The scheme will be implemented by the National Safai Karamcharis Finance and Development Corporation (NSKFDC) for a period of 3 years (FY 2023-24 to FY 2025-26).
Answer: (b) 2 only; Difficulty Level: Medium
Incorrect
Explanation
Statement 1 is correct
- National Action for Mechanized Sanitation Ecosystem (NAMASTE) Scheme is a joint initiative by the Ministry of Social Justice and Empowerment and the Ministry of Housing and Urban Affairs.
- It has replaced the Self-Employment Scheme for the Rehabilitation of Manual Scavengers (SRMS).
Statement 2 is incorrect
- It is a central sector scheme launched in 2022.
- It aims to eliminate the manual engagement of sanitation workers in hazardous tasks related to sewer and septic tank cleaning.
- The scheme will be implemented by the National Safai Karamcharis Finance and Development Corporation (NSKFDC) for a period of 3 years (FY 2023-24 to FY 2025-26).
Answer: (b) 2 only; Difficulty Level: Medium
Unattempted
Explanation
Statement 1 is correct
- National Action for Mechanized Sanitation Ecosystem (NAMASTE) Scheme is a joint initiative by the Ministry of Social Justice and Empowerment and the Ministry of Housing and Urban Affairs.
- It has replaced the Self-Employment Scheme for the Rehabilitation of Manual Scavengers (SRMS).
Statement 2 is incorrect
- It is a central sector scheme launched in 2022.
- It aims to eliminate the manual engagement of sanitation workers in hazardous tasks related to sewer and septic tank cleaning.
- The scheme will be implemented by the National Safai Karamcharis Finance and Development Corporation (NSKFDC) for a period of 3 years (FY 2023-24 to FY 2025-26).
Answer: (b) 2 only; Difficulty Level: Medium
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Question 5 of 7
5. Question
Q5. {Geo – EG – Mineral Resources} Consider the following statements regarding Potassium oxide or Potash:
- More than 90% of potash consumed in India is utilized in agriculture.
- India meets its entire potash requirement through imports.
- Potash can be used for hardening water.
Which of the statements given above is/are not correct?
Correct
Explanation
- Potash refers to potassium-bearing minerals primarily used in fertilizers.
- The names caustic potash, potassa, and lye are frequently used for potassium hydroxide. In fertilizer terminology, potassium oxide is called potash.
- Forms of Potash:
- Sulphate of Potash (SOP): Premium fertilizer, chloride-free, used for high-value crops (fruits, vegetables, leafy plants).
- Muriate of Potash (MOP): Contains chloride, used mainly for carbohydrate-based crops like wheat.
Statement 1 is correct, but statement 3 is not correct
- Usage:
- In India, over 90% of potash is used in agriculture to enhance crop yield and soil fertility.
- Agricultural Importance: One of the three essential nutrients (Nitrogen, Phosphorus, Potassium – NPK) to improve crop yield, enhance plant growth, and strengthen disease resistance.
- Industrial Applications: Used in the production of glass, soap, and as a water softener, not hardener. (Potash soap is a soft soap made from the lye leached from wood ashes).
- Food Processing: Acts as a preservative, acidity regulator, and stabilizer in processed foods.
Statement 2 is correct
- Exploration History:
- GSI conducted surveys in Rajasthan between 1974-1991 and later in Punjab from 2017 onward.
- First potash deposits in Punjab confirmed in 2019.
- India has not yet started potash mining; all requirements are met through imports.
Answer: (b) 3 only; Difficulty Level: Hard
Incorrect
Explanation
- Potash refers to potassium-bearing minerals primarily used in fertilizers.
- The names caustic potash, potassa, and lye are frequently used for potassium hydroxide. In fertilizer terminology, potassium oxide is called potash.
- Forms of Potash:
- Sulphate of Potash (SOP): Premium fertilizer, chloride-free, used for high-value crops (fruits, vegetables, leafy plants).
- Muriate of Potash (MOP): Contains chloride, used mainly for carbohydrate-based crops like wheat.
Statement 1 is correct, but statement 3 is not correct
- Usage:
- In India, over 90% of potash is used in agriculture to enhance crop yield and soil fertility.
- Agricultural Importance: One of the three essential nutrients (Nitrogen, Phosphorus, Potassium – NPK) to improve crop yield, enhance plant growth, and strengthen disease resistance.
- Industrial Applications: Used in the production of glass, soap, and as a water softener, not hardener. (Potash soap is a soft soap made from the lye leached from wood ashes).
- Food Processing: Acts as a preservative, acidity regulator, and stabilizer in processed foods.
Statement 2 is correct
- Exploration History:
- GSI conducted surveys in Rajasthan between 1974-1991 and later in Punjab from 2017 onward.
- First potash deposits in Punjab confirmed in 2019.
- India has not yet started potash mining; all requirements are met through imports.
Answer: (b) 3 only; Difficulty Level: Hard
Unattempted
Explanation
- Potash refers to potassium-bearing minerals primarily used in fertilizers.
- The names caustic potash, potassa, and lye are frequently used for potassium hydroxide. In fertilizer terminology, potassium oxide is called potash.
- Forms of Potash:
- Sulphate of Potash (SOP): Premium fertilizer, chloride-free, used for high-value crops (fruits, vegetables, leafy plants).
- Muriate of Potash (MOP): Contains chloride, used mainly for carbohydrate-based crops like wheat.
Statement 1 is correct, but statement 3 is not correct
- Usage:
- In India, over 90% of potash is used in agriculture to enhance crop yield and soil fertility.
- Agricultural Importance: One of the three essential nutrients (Nitrogen, Phosphorus, Potassium – NPK) to improve crop yield, enhance plant growth, and strengthen disease resistance.
- Industrial Applications: Used in the production of glass, soap, and as a water softener, not hardener. (Potash soap is a soft soap made from the lye leached from wood ashes).
- Food Processing: Acts as a preservative, acidity regulator, and stabilizer in processed foods.
Statement 2 is correct
- Exploration History:
- GSI conducted surveys in Rajasthan between 1974-1991 and later in Punjab from 2017 onward.
- First potash deposits in Punjab confirmed in 2019.
- India has not yet started potash mining; all requirements are met through imports.
Answer: (b) 3 only; Difficulty Level: Hard
-
Question 6 of 7
6. Question
Q6. {Polity – Bodies – Statutory} Consider the following statements regarding the National Commission for Safai Karamcharis (NCSK):
- It functions as a statutory body under the National Commission for Safai Karamcharis Act, 1993.
- It investigates complaints and takes suo-motu cognizance of non-implementation of schemes.
- It submits report to President regarding the challenges faced by sanitation workers.
Which of the statements given above are not correct?
Correct
Explanation
- National Commission for Safai Karamcharis (NCSK) was first constituted in 1994 under National Commission for Safai Karamcharis Act, 1993.
- Objectives: Improve working conditions of sanitation workers; Facilitate socio-economic upliftment; Aim for zero fatalities in hazardous cleaning.
Statement 1 is incorrect
- Current Status: Since the Act lapsed in 2004, NCSK functions as a non-statutory body, with tenure extensions granted via government resolutions.
- Parent Ministry: Ministry of Social Justice and Empowerment (MoSJE).
Statement 2 is correct, but statement 3 is incorrect
- Mandate and Functions of NCSK:
- Policy Recommendations: Suggests programs to eliminate inequalities in status, facilities, and opportunities of Safai Karamcharis.
- Monitoring & Evaluation: Assesses implementation of rehabilitation schemes for sanitation workers.
- Safeguarding Rights: Investigates complaints and takes suo-motu cognizance of non-implementation of schemes.
- Health & Safety Oversight: Monitor working condition, health, wages & safety of sanitation workers.
- Reporting: To Central & State Govts regarding challenges faced by sanitation workers.
Answer: (b) 1 and 3 only; Difficulty Level: Medium
Incorrect
Explanation
- National Commission for Safai Karamcharis (NCSK) was first constituted in 1994 under National Commission for Safai Karamcharis Act, 1993.
- Objectives: Improve working conditions of sanitation workers; Facilitate socio-economic upliftment; Aim for zero fatalities in hazardous cleaning.
Statement 1 is incorrect
- Current Status: Since the Act lapsed in 2004, NCSK functions as a non-statutory body, with tenure extensions granted via government resolutions.
- Parent Ministry: Ministry of Social Justice and Empowerment (MoSJE).
Statement 2 is correct, but statement 3 is incorrect
- Mandate and Functions of NCSK:
- Policy Recommendations: Suggests programs to eliminate inequalities in status, facilities, and opportunities of Safai Karamcharis.
- Monitoring & Evaluation: Assesses implementation of rehabilitation schemes for sanitation workers.
- Safeguarding Rights: Investigates complaints and takes suo-motu cognizance of non-implementation of schemes.
- Health & Safety Oversight: Monitor working condition, health, wages & safety of sanitation workers.
- Reporting: To Central & State Govts regarding challenges faced by sanitation workers.
Answer: (b) 1 and 3 only; Difficulty Level: Medium
Unattempted
Explanation
- National Commission for Safai Karamcharis (NCSK) was first constituted in 1994 under National Commission for Safai Karamcharis Act, 1993.
- Objectives: Improve working conditions of sanitation workers; Facilitate socio-economic upliftment; Aim for zero fatalities in hazardous cleaning.
Statement 1 is incorrect
- Current Status: Since the Act lapsed in 2004, NCSK functions as a non-statutory body, with tenure extensions granted via government resolutions.
- Parent Ministry: Ministry of Social Justice and Empowerment (MoSJE).
Statement 2 is correct, but statement 3 is incorrect
- Mandate and Functions of NCSK:
- Policy Recommendations: Suggests programs to eliminate inequalities in status, facilities, and opportunities of Safai Karamcharis.
- Monitoring & Evaluation: Assesses implementation of rehabilitation schemes for sanitation workers.
- Safeguarding Rights: Investigates complaints and takes suo-motu cognizance of non-implementation of schemes.
- Health & Safety Oversight: Monitor working condition, health, wages & safety of sanitation workers.
- Reporting: To Central & State Govts regarding challenges faced by sanitation workers.
Answer: (b) 1 and 3 only; Difficulty Level: Medium
-
Question 7 of 7
7. Question
Q7. {IE – Banking} How many of the following are considered as impacts of RBI’s repo-rate cut on economy?
- Higher EMIs
- Lower interest on savings
- Rupee depreciation
- Cheaper business loans
Select the correct answer using the code given below:
Correct
Explanation
- Repo Rate (Repurchase Agreement or Repurchasing Option) is the interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks.
- RBI has reduced the repo rate by 25 basis points (bps) to 6.25%. This is the first rate cut in five years, following a two-year period of maintaining it at 6.50%.
Option 1 is incorrect, but option 4 is correct
- Impacts of repo rate cut on Indian economy:
- External Benchmark Lending Rate Reduction: Interest rates on repo-linked loans will drop by 25 bps.
- Marginal Cost of Fund-Based Lending Rate Impact: May lead to gradual reductions in loan costs.
- Higher Liquidity: Increased borrowing can enhance liquidity and consumption in the economy.
- Lower EMIs: Home, vehicle, and personal loan EMIs will decline, easing financial burdens.
- Cheaper Business Loans: Encourages investment in expansion, technology, and infrastructure.
- Boost in Consumer Spending: Affordable credit boost purchases of homes, vehicles & consumer goods.
- Growth in Real Estate and Auto Sector: Lower mortgage and auto loan rates stimulate demand.
- Improves Stock Market Sentiment: Reduced rates can improve investor confidence and market performance.
Options 2 and 3 are correct
- Concerns and Potential Risks of repo rate cut:
- Inflationary Pressures: Increased money supply and spending may drive prices higher.
- Lower Interest on Savings: Decline in deposit rates may reduce the appeal of savings and fixed deposits.
- Rupee Depreciation: A lower rate environment may cause capital outflows, weakening the currency.
Answer: (c) Only three; Difficulty Level: Medium
Incorrect
Explanation
- Repo Rate (Repurchase Agreement or Repurchasing Option) is the interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks.
- RBI has reduced the repo rate by 25 basis points (bps) to 6.25%. This is the first rate cut in five years, following a two-year period of maintaining it at 6.50%.
Option 1 is incorrect, but option 4 is correct
- Impacts of repo rate cut on Indian economy:
- External Benchmark Lending Rate Reduction: Interest rates on repo-linked loans will drop by 25 bps.
- Marginal Cost of Fund-Based Lending Rate Impact: May lead to gradual reductions in loan costs.
- Higher Liquidity: Increased borrowing can enhance liquidity and consumption in the economy.
- Lower EMIs: Home, vehicle, and personal loan EMIs will decline, easing financial burdens.
- Cheaper Business Loans: Encourages investment in expansion, technology, and infrastructure.
- Boost in Consumer Spending: Affordable credit boost purchases of homes, vehicles & consumer goods.
- Growth in Real Estate and Auto Sector: Lower mortgage and auto loan rates stimulate demand.
- Improves Stock Market Sentiment: Reduced rates can improve investor confidence and market performance.
Options 2 and 3 are correct
- Concerns and Potential Risks of repo rate cut:
- Inflationary Pressures: Increased money supply and spending may drive prices higher.
- Lower Interest on Savings: Decline in deposit rates may reduce the appeal of savings and fixed deposits.
- Rupee Depreciation: A lower rate environment may cause capital outflows, weakening the currency.
Answer: (c) Only three; Difficulty Level: Medium
Unattempted
Explanation
- Repo Rate (Repurchase Agreement or Repurchasing Option) is the interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks.
- RBI has reduced the repo rate by 25 basis points (bps) to 6.25%. This is the first rate cut in five years, following a two-year period of maintaining it at 6.50%.
Option 1 is incorrect, but option 4 is correct
- Impacts of repo rate cut on Indian economy:
- External Benchmark Lending Rate Reduction: Interest rates on repo-linked loans will drop by 25 bps.
- Marginal Cost of Fund-Based Lending Rate Impact: May lead to gradual reductions in loan costs.
- Higher Liquidity: Increased borrowing can enhance liquidity and consumption in the economy.
- Lower EMIs: Home, vehicle, and personal loan EMIs will decline, easing financial burdens.
- Cheaper Business Loans: Encourages investment in expansion, technology, and infrastructure.
- Boost in Consumer Spending: Affordable credit boost purchases of homes, vehicles & consumer goods.
- Growth in Real Estate and Auto Sector: Lower mortgage and auto loan rates stimulate demand.
- Improves Stock Market Sentiment: Reduced rates can improve investor confidence and market performance.
Options 2 and 3 are correct
- Concerns and Potential Risks of repo rate cut:
- Inflationary Pressures: Increased money supply and spending may drive prices higher.
- Lower Interest on Savings: Decline in deposit rates may reduce the appeal of savings and fixed deposits.
- Rupee Depreciation: A lower rate environment may cause capital outflows, weakening the currency.
Answer: (c) Only three; Difficulty Level: Medium
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