Скачать или смотреть Reverse repo rate ( uses, effect on economy, benefit, relation with RBI ) explain in English.

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💚Reverse Repo Rate :💚


Reverse repo rate ( uses, effect on economy, benefit, relation with RBI ) explain in English.



👉Reverse repo rate is the rate at which the central bank of a country
borrows money from commercial banks within the country.

👉It is a monetary policy instrument that can be used to control the money supply in the country.

👉An increase in the reverse repo rate will decrease the money supply and vice-versa, other things remaining constant.

👉An increase in reverse repo rate means that commercial banks will get more incentives to park their funds with the RBI,
thereby decreasing the supply of money in the market.

👉reverse repo rate is used to control the money supply.

👉The fixed interest rate at which the Reserve Bank absorbs liquidity, on
an overnight basis, from banks against the collateral of eligible government
securities under the Liquidity Adjustment Facilitys.

👉Reverse repo rate is opposite to that of Repo Rate.

👉An increase in the reverse repo rate means that the banks will get a higher
rate of interest from RBI.

👉As a result, banks prefer to lend their money to RBI.
which is always safe instead of lending it to others
( like people, companies, and many more.)
which is always risky.

👉The reverse repo rate is the rate at which banks earn interest when they park surplus funds with the RBI.
The repo rate helps control inflation, and the reverse repo rate increases liquidity.
The repo rate set by the RBI is always higher than the reverse repo rate.

👉The Reverse Repo Rate helps the RBI get money from the banks when it needs.
In return, the RBI offers attractive interest rates to them.
The banks also voluntarily park excess funds with the central bank as it provides them with an opportunity to earn higher interest on surplus money.

👉What is the impact of the repo rate increase on economy? :
Central banks typically raise the benchmark repo rate –
the interest rate at which commercial banks borrow money by selling their securities to the Reserve Bank –
to shrink money supply in the economy.

👉Lower interest rates make for easy borrowing and businesses typically borrow to invest in new economic activities.