What is Repo rate ?

Asked 8 years ago 677 views

1 Answer

1

Before explaining about repo rate, let us define repo rate:

 Repo rate is the rate at which the central bank of a country (Reserve Bank of India for India) lends money to commercial banks in the scenario of any shortfall of funds. Repo rate is used by monetary authorities to control the situation of inflation.

when repo rate is to be controlled?
In the scenario of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the market and hence helps in controlling inflation. 

answered 8 years ago Anonymous User
  1. quite informative :) Anonymous User | 8 years ago

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