what is repo rate

A repurchase agreement, also known as a repo, is a form of short-term borrowing, mainly in government securities. The repo rate is the interest rate at which the central bank of a country lends money to commercial banks. In the case of India, the Reserve Bank of India (RBI) uses the repo rate to increase or decrease the money supply in the economy. A decrease in repo rates encourages banks to sell securities back to the government in return for cash, thus increasing the money supply available to the general economy. Conversely, by increasing repo rates, central banks can effectively decrease the money supply by discouraging banks from reselling these securities