Reserve Bank of India Reverse REPO Rate Decision

The Reserve Bank of India (RBI) Reverse Repo Rate Decision is announced by the Monetary Policy Committee six times a year, similarly to the basic interest rate decision.

As the name implies, the rate is opposite to the repo rate. This is the interest rate on reverse borrowing, at which the RBI borrows money from commercial banks. The RBI may use this tool when too much money accumulates in the banking system. When the reverse repo rate increases, banks prefer to lend money to the Reverse Bank (which is also considered a more reliable borrower), than to the population or businesses.

A change in repo rate affects the inflow of liquidity into the banking system, while the reverse repo affects the outflow of liquidity to the Reserve Bank. An unexpected decrease in the reverse repo rate can be seen as positive for the Indian rupee quotes.