d the consumers are thus encouraged not to take loans to invest and drive the inflation to a downward curve.
Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always happy to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of the banking system. This draining of money eventually leads to less amount of money(interest) available for the banks to provide loans and it also appears to contain the rising inflation.