Question

What is REPO rate? How can it result in lowering the rate of interest on loans?

Answer 1

The rate at which RBI repurchases government securities from banks is known as REPO rate. When government repurchases the securities in return the banks get cash to meet their short term requirement and they can give loan at low rate of interest.
Whenever RBI wants to lower the interest rate it reduced the REPO rate. It will become more clear from following cycle.
As the REPO rate charged by RBI reduces, the money is available to banks at low rate, they pass the benefit to the end user by lowering the rate of interest on loan.
Reverse REPO rate is opposite to REPO rate.