Question

Explain the role of reverse repo rate in controlling credit creation

Answer 1

Explanation:

Reverse Repo Rate refers to the rate of interest paid by the Central Bank on deposits made by the Central Bank on deposits made by the Commercial Banks. When it is raised, commercial Banks are encourage to make more deposits with Central Bank. As a result, funds available for lending with the Commercial Banks decrease. Their capacity of lending declines and Credit Creation is lessRead more on Sarthaks.com - https://www.sarthaks.com/82896/explain-the-role-of-reverse-repo-rate-in-controlling-credit-creation