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Question
What Is the Reverse Repo Rate?
What Is the Reverse Repo Rate?
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Solution
The rate at which the RBI (central bank) borrows money from commercial banks for a short term is called the Reverse repo rate. It helps the central bank to have a ready source of liquidity at the time of need.
It is a mechanism of absorbing the liquidity in the market and is used by RBI when there is surplus liquidity in the economy. Banks get great interest rates from RBI for such an arrangement.
Stay connected with our website for more questions and answers on various commerce topics.
The rate at which the RBI (central bank) borrows money from commercial banks for a short term is called the Reverse repo rate. It helps the central bank to have a ready source of liquidity at the time of need.
It is a mechanism of absorbing the liquidity in the market and is used by RBI when there is surplus liquidity in the economy. Banks get great interest rates from RBI for such an arrangement.
Stay connected with our website for more questions and answers on various commerce topics.
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