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Answer Posted / harsha

This is one of the tool that RBI has to control
liquidity/inflation.

When RBI revises the rate for lending MONEY against
Securities to BANKS, it is called REPO RATE. Here, the RBI
is the Lender and the Banks are the borrower. If the REPO
rate is raised by the RBI, then Banks have to borrow money
at higher rate.

When RBI revises the rate for lending SECURITIES for Money
to BANKS, it is called REVERSE REPO RATE. Here, the RBI is
the Borrower and the Banks are the Lender. If the REVERSE
REPO rate is raised by the RBI, then RBI has to borrow
money at higher rate.

Is This Answer Correct ?    8 Yes 4 No



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