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WHAT DO U MEAN BY REPO RATE???
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Answer Posted / vilaas
Reporate is the rate by which banking institutions
borrows money from RBI for their short term financing,
revise in raporate force to change in other facilities such
as deposit loans etc. Reverse reporate is the rate at which
banks deposit their amount with RBI, more the raporate more
amount bank keep with RBI as they will get better income
with security.
If raporate increass the rate at which bank taken amount
increases therefore they charges high intrest rates on
loans therefore liquidity decreases as people have less
amount with them and so inflation also decreases.and
viceversa if reporate decreases.
if REVERSE REPORATE increeases bank keep more amount with
RBI as a result their is less liquidity in market theirfore
inflation decreases and viceversa if REPORATE decreases.
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