Reverse Repo Rate

By Definition, Reverse Repo Rate is the Rate at which the Central Bank of the Country borrows Money from the Commercial Banks of the Country, in Exchange for Securities. In other Words, it is the Rate at which Commercial Banks can park their excess Money with the Central Bank of the Country.

It is another Monetary Policy Instrument like the Repo Rate which is used to control the Money supply in the Country. 

A Decrease in this Rate can Increase the Money supply as it will deter the Commercial Banks to park their Money with the Central Bank. Similarly, an Increase in the Rate will encourage the Banks to do the same.

A Reverse Repo Rate is always lower than the Repo Rate. 

Regards,

Pragya Banerjee
MBA (Finance); 7+ years of work experience
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