𝐑𝐞𝐩𝐨 𝐑𝐚𝐭𝐞 𝐯𝐬 𝐑𝐞𝐯𝐞𝐫𝐬𝐞 𝐑𝐞𝐩𝐨 𝐑𝐚𝐭𝐞

𝐑𝐞𝐩𝐨 𝐑𝐚𝐭𝐞:

The rate at which the Reserve Bank of India (RBI) lends money to commercial banks.

▪️ Decreases market liquidity: Higher repo rates make borrowing from the RBI costlier, leading to reduced money supply with banks and lesser cash available for borrowers.

▪️ Increases market liquidity: Lower repo rates make borrowing cheaper, increasing the money supply with banks and more cash available for borrowers.

𝐑𝐞𝐯𝐞𝐫𝐬𝐞 𝐑𝐞𝐩𝐨 𝐑𝐚𝐭𝐞:

The rate at which the RBI borrows money from commercial banks.

▪️ Decreases market liquidity: Higher reverse repo rates incentivize banks to deposit more money with the RBI, reducing the cash available for lending to borrowers.

▪️ Increases market liquidity: Lower reverse repo rates discourage banks from depositing money with the RBI, increasing the cash available for lending to borrowers.