Repo rate is the rate at which Reserve Bank of India $\text{(RBI)}$ lends commercial banks, and reverse repo rate is the rate at which $\text{(RBI)}$ borrows money from commercial banks.

Which of the following statements can be inferred from the above passage?

1. Decrease in repo rate will increase cost of borrowing and decrease lending by commercial banks.
2. Increase in repo rate will decrease cost of borrowing and increase lending by commercial banks.
3. Increase in repo rate will decrease cost of borrowing and decrease lending by commercial banks.
4. Decrease in repo rate will decrease cost of borrowing and increase lending by commercial banks.

“Repo rate is the rate at which Reserve Bank of India (RBI) lends commercial banks

So a decrease in repo rate means commercial banks have to pay less.

Correct option: D.

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