Meaning
Understanding how central banks influence the economy starts with the REPO Rate, a crucial instrument for monetary policy.Definition
The REPO Rate is the interest rate at which a country’s central bank lends money to commercial banks, typically against government securities. It serves as a primary tool for liquidity management.How It Works
Commercial banks borrow funds from the central bank at this rate when they face a shortage of liquidity. This short-term borrowing helps banks meet their immediate financial needs.Significance
It directly impacts the lending rates offered by banks to their customers for various loans. Changes in the REPO Rate influence inflation, credit availability, and overall economic activity and growth.Author
