This is exact opposite of Repo rate.
Reverse Repo rate is the rate at which Central Bank(RBI) borrows money from banks. RBI uses this tool when it feels there is too much money floating in the banking system.
Banks are always happy to lend money to RBI since their money is in safe hands with a good interest.
An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates.
It can cause the money to be drawn out of the banking system.
No comments:
Post a Comment