What does repo rate changes mean?

  • Repo rate or repurchase rate is the rate at which RBI lends money to banks for controlling and managing the cashflow in the market, inflation and achieve targeted economic growth.
  • Reverse repo rate is the rate at a bank earns for parking it's money in RBI.
  • Now when repo rate is slashed it means home loans get cheaper, interest charged on credit cards and laons in general get are cut down and they become cheaper sources.
  • On the other hand Reverse repo rate decrease would motivate banks to park lesser money with RBI and lend out more. According to an estimate 7-8L crore rupees of Banks is with RBI as they fear lending out.
  • Because of all these measures by Monetary Policy Committee the cashflow in the economy gets a boost
  • The decrease in repo rates also means the rates of Fixed deposits will also go down for the banks to manage their state of working.

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