Practicing Success
The rate at which banks part short-term excess liquidity with RBI, is called: |
Repo Rate Reverse Repo Rate Bank Rate Cash Reserve Ratio |
Reverse Repo Rate |
When commercial banks approach the Reserve Bank of India for funds, they're charged a certain amount of interest. The rate at which RBI lends these finances to commercial banks is called the repo rate. Reverse repo rate is the interest offered by the RBI to banks who deposit funds into the treasury. For instance, when banks generate excess funds, they may deposit the money in the central bank. This is a much safer approach when compared to lending it to other companies or account holders. |