Answer Posted / nipun

MANY OF THE ANSWERS HERE ARE WRONG

correct version:
repo stands for REPurchase Offer where rbi borrows
money/cash from the bank and in turn give the bank
securities which act as collateral and also pay it back
interest on the cash it has taken as loan. it is called
repurchase offer because RBI will in return buy back the
collateral after specified period.
higher the repo higher the lending rate for bank and hence
even higher the borrowing rate for bank. thus it takes
liquidity out of the market , if liquidity has caused
inflation it will also reduce inflation


reverse repo is opposite

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