SBI PO Reading Comprehension Test 03

1. Read the following passage carefully and answer the questions given after it. When the Reserve Bank of India changes its repo rate, it is adjusting the price at which banks borrow money from it. In October 2026 the repo rate stood at 5.50 per cent, after a cut of 25 basis points. A cut is meant to make loans cheaper. Banks borrow more cheaply, and in time they pass the benefit to borrowers through lower lending rates. But the pass-through is neither instant nor even. Loans linked to an external benchmark, such as the repo rate itself, reset quickly; older loans linked to internal benchmarks move slowly, if at all. A borrower on a fixed-rate loan may see no change whatever. There is a second reason for caution. The central bank cuts rates to support growth, but it must also keep inflation in check. If prices rise too fast, the same cheap money that lifts spending can erode the value of savings. Rate decisions are therefore a balance, struck meeting by meeting, between encouraging borrowing today and protecting the purchasing power of tomorrow.

   Q1.What is the repo rate, as defined in the passage?

   • A.The interest banks pay their depositors
   • B.The rate at which banks lend to each other
   • C.The price at which banks borrow money from the Reserve Bank
   • D.The tax on banking profits
   • E.The fee for opening a bank account

2. Q2.What was the repo rate in October 2026, according to the passage?

   • A.5.25 per cent, after a rise
   • B.5.75 per cent, unchanged
   • C.5.00 per cent, after a cut of 50 basis points
   • D.5.50 per cent, after a cut of 25 basis points
   • E.6.00 per cent, after a rise

3. Q3.Why might a borrower's EMI not fall at once after a rate cut?

   • A.Banks are forbidden to cut lending rates
   • B.The Reserve Bank blocks all loan changes
   • C.Borrowers must apply to the government first
   • D.EMI changes need a new loan agreement by law
   • E.The loan may be linked to an internal benchmark or be fixed-rate

Start the test to answer these. Correct answers and explanations are shown after you submit.