RBI raise repo rate, what is its likely impact on Indian economy?

Question

Question

This question was previously asked in

SSC MTS Previous Paper 26 (Held On: 16 August 2019 Shift 2)

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Answer 1

Repo rate is the rate at which the central bank lends to commercial banks.
Repo rate is used by monetary authorities to control inflation.
An increase in repo rate by the central bank controls money supply hence helps in controlling Inflation.

Monetary Policy tool	Description
Repo Rate	The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
Reverse Repo Rate	The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.
Marginal Standing Facility	A facility under which scheduled commercial banks can borrow an additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest
Open Market Operation	Open market operations are the sale and purchase of government securities and treasury bills by RBI