Q. 24 B5.0( 1 Vote )

Explain the role

Answer :

‘Reverse repo rate’ is the rate of interest at which the commercial banks keep their surplus funds with the central bank. The central bank can control money supply by increasing or decreasing the reverse repo rate. Rise in reverse repo rate will encourage the commercial banks to keep more funds with the central bank. This reduces funds available for lending to general public and thus the money supply will be regulated.

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