Explanation: It is basically the rate of interest at which RBI Lends money to Banks (Commercial Banks).
Why is it important: When the repo rate increases, it becomes costlier for the banks to get loans from RBI, which thus leads to banks having lesser liquidity(money in the bank) to lend, which further leads to a general shortage in the liquidity (money in circulation) in the market. Repo rate generally is an instrument of choice for RBI to control the liquidity in the market.
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