Full formBanking & Finance
RRstands forReverse Repo
Full Form of RR
What is RR?
Reverse Repo (RR) is a monetary policy instrument used by the Reserve Bank of India (RBI) to absorb excess liquidity from the banking system. In a reverse repo transaction, banks lend surplus funds to the RBI in exchange for government securities, earning interest at the reverse repo rate. This rate is typically lower than the repo rate and serves as a floor for short-term interest rates in the economy. The RR mechanism is part of the Liquidity Adjustment Facility (LAF) and is actively used during periods of high inflation or when the RBI aims to tighten money supply. It is announced periodically during Monetary Policy Committee (MPC) meetings and influences lending rates, inflation, and economic growth. For students preparing for banking exams like IBPS, RBI Grade B, and UPSC Economics, understanding the RR rate is crucial as questions often test its impact on liquidity and policy transmission. The term appears in current affairs, budget documents, and financial news, making it a core concept for anyone studying Indian banking and finance.
RR का फुल फॉर्म
रिवर्स रेपो
Example
The RBI raised the RR rate by 25 basis points in the latest Monetary Policy review to control inflationary pressures.
RR — frequently asked questions
What is the full form of RR?
The full form of RR is Reverse Repo, a monetary policy tool used by the RBI to absorb excess liquidity from banks.
What is the difference between RR and Repo Rate?
Repo rate is the rate at which the RBI lends money to banks, while RR (reverse repo) is the rate at which banks lend to the RBI. The repo rate is higher than the reverse repo rate.
How does an increase in RR affect the economy?
An increase in RR encourages banks to park more funds with RBI, reducing money supply in the economy. This helps control inflation but can slow down economic growth.