Answer in detail.
Explain in details Repo Rate and Reverse Repo Rate of Central Bank.
Explain in details Repo Rate and Reverse Repo Rate of Central Bank.
Repo
rate is the rate charged on the secured loans offered by the Central bank
to the commercial banks that includes collateral. It is increased at the time
of inflation to reduce the credit creation by the commercial banks which reduces the money supply
in the economy and it is decreased at the time of deflation to increase the credit creation by the commercial banks which increases the money supply in the economy.
Reverse repo rate is
the rate at which the commercial banks keep the reserves with the central bank.
This rate is determined by the central bank and the central bank pays it to the
commercial banks in percentage of the reserves kept with them. It is decreased at the time of inflation to reduce the credit creation by the commercial banks which reduces the money supply in the economy and it is increased at the time of deflation to increase the credit creation by the commercial banks which increases the money supply in the economy.
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Repo rate is the rate charged on the secured loans offered by the Central bank to the commercial banks that includes collateral. It is increased at the time of inflation to reduce the credit creation by the commercial banks which reduces the money supply in the economy and it is decreased at the time of deflation to increase the credit creation by the commercial banks which increases the money supply in the economy.
Reverse repo rate is the rate at which the commercial banks keep the reserves with the central bank. This rate is determined by the central bank and the central bank pays it to the commercial banks in percentage of the reserves kept with them. It is decreased at the time of inflation to reduce the credit creation by the commercial banks which reduces the money supply in the economy and it is increased at the time of deflation to increase the credit creation by the commercial banks which increases the money supply in the economy.
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