Reverse Repo Rate: Understanding Its Role In Monetary Policy

The Reverse Repo Rate (RRR) is the interest rate at which the central bank borrows money from commercial banks. A higher RRR encourages banks to park excess funds with the central bank, while a lower rate may incentivize them to lend more. Adjusting the RRR helps control inflation and stabilizes the financial system. It’s a crucial tool for monetary policy and economic stability.