TNPSC Current Affairs April 2017
RBI keeps repo rate unchanged and raises reverse repo rate
During RBI’s First Bimonthly policy review, Reserve Bank of India keeps repo rate unchanged at 6.25 % and raises the reverse repo rate by 25 bps from 5.75% to 6%.
This move will help in narrow the liquidity adjustment facility (LAF). LAF is a tool which allows banks to borrow money through repurchase agreements. LAF which helps banks adjusting the day to day mismatches in liquidity
The excess Liquidity arose due to Government’s demonetization policy.
What is repo Rate?
Repo rate (re purchase rate) is the rate which Reserve bank of India lends money to other banks in the time of shortfall of funds. In simple words, when commercial banks are in money crunch, they will borrow money from RBI for interest, the rate at which RBI lends money is called Repo Rate.
What is Reverse repo Rate?
Reverse Repo is the rate given by Reserve bank of India to the commercial bank, when the commercial banks have excess of money and choose to deposit money in RBI