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Reverse repo rate cut to increase bank credit
05
Mar '09
The apex bank, Reserve Bank of India (RBI), has cut its repo rate by 50 basis points, from 5.5 percent to 5 percent and also reduced the reverse repo rate, also by 0.50 percent, from 4 percent to 3.5 percent.

The repo rate is the rate at which the Reserve Bank, lends to other banks against a pledge of government bonds and reverse repo rate is the rate at which other banks park their excess funds with the apex bank.

This in effect means that since the apex bank has cut the reverse repo rate, it will be more fruitful for banks to lend credit than parking their funds with RBI, which means, additional liquidity will be released in to markets.

Fibre2fashion News Desk - India

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