Question

What is meant by Reverse Repo rate? How does it influence credit availability? ​

Answer 1

Answer:

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Answer 2

Reverse Repo Rate basically refers to the interest rate which is followed by commercial banks in India to lend funds to the Reserve Bank of India(RBI).

Explanation:

• If the reverse repo rate increases,it essentially leads to the reduction in the money supply or less credit availability in the economy.
• A decrease in the reverse repo rate leads to the expansion of money supply or higher credit availability in the economy and increased money or credit supply in the economy customarily entails higher credit or liquidity flow in the economy.
• Reverse repo rate can be used as a macroeconomic instrument to manipulate or control the inflation rate in the economy in accordance with the economic growth and development.