what is inflation, repo rate and reverse rate?
Definition of 'Inflation'
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.
Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive
Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. Banks are always happy to lend money to the RBI since their money are in safe hands with a good interest.
An increase in reverse repo rate can prompt banks to park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system.
Repo rate is the rate of interest at which central bank lends sums of money to commercial banks.
Reverse repo rate is the the rate of interest the central banks pay on surplus funds parked as deposits by commercial banks.
Repo rate refers to the rate at which government purchase and sales the security at a given price and At a given point of time.
Reverse repo rate refers to the rate at which all these government securities are repurchased by the government at a given point of time and a predetermined price. It helps the commercial banks to park their surplus fund with the centeral banks
Repo Rate: The term ?Repo? stands for ?Repurchase agreement?. Repo is a form of short-term, collateral-backed borrowing instrument and the interest rate charged for such borrowings is termed as repo rate.
Reverse Repo Rate: Reverse repo as the name suggests is an opposite contract to the Repo Rate. Reverse Repo rate is the rate at which the Reserve Bank of India borrows funds from the commercial banks in the country.
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