Answer :

● Repo rate is the rate of interest at which the central bank lends money to the commercial banks for a short period of time.


● Repo rate can be very useful in controlling credit creation.


● If the repo rate is increased, the cost of borrowing becomes costlier than before.


● So, the banks increase their rate of interest in return.


● The cost of borrowing increases for the people and they borrow less.


● Thus, the banks reduces its level of credit creation.


Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
caricature
view all courses
RELATED QUESTIONS :

Explain how 'ReveEconomics - Board Papers

Explain the role Economics - Board Papers

Explain howEconomics - Board Papers

Explain theEconomics - Board Papers