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translateGLOSSARY · BANKING

What is Reverse Repo Rate?

The reverse repo rate is the interest rate at which the RBI borrows funds from commercial banks, absorbing liquidity from the system.

PrepClever Glossary · Banking

updateUpdated July 2026

When banks park surplus funds with the RBI, they earn the reverse repo rate. A higher reverse repo encourages banks to lend to the RBI rather than the market, tightening liquidity; it is the mirror image of the repo rate.

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Example

During surplus-liquidity periods, banks deposit excess cash with the RBI at the reverse repo rate instead of lending it out.

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IBPS PORBI Grade BJAIIB

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FAQs about Reverse Repo Rate

Why does the RBI use the reverse repo rate?add

To absorb excess liquidity from the banking system — raising it incentivises banks to park funds with the RBI, reducing money available for lending.

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What is Reverse Repo Rate?

Related Terms

Repo Rate

Cash Reserve Ratio (CRR)

Liquidity Coverage Ratio (LCR)

FAQs about Reverse Repo Rate

Where to go from here

Master every term that matters

What is Reverse Repo Rate?

Related Terms

Repo Rate

Cash Reserve Ratio (CRR)

Liquidity Coverage Ratio (LCR)

FAQs about Reverse Repo Rate

Where to go from here

Master every term that matters