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Repo Rate In Telugu - Why Loan interest rates are Increasing? | Effect of RBI Repo Rate| Kowshik

Repo rates, also known as repurchase agreement rates, are the interest rates at which banks can borrow money from the central bank by selling securities and agreeing to repurchase them at a later date. The central bank uses the repo rate as a tool to manage the money supply and control inflation in the economy.

When the central bank increases the repo rate, it becomes more expensive for banks to borrow money. This can encourage banks to lend less and save more, which can help to reduce the money supply and control inflation. On the other hand, when the central bank decreases the repo rate, it becomes cheaper for banks to borrow money, which can encourage them to lend more and stimulate economic growth.

There are several reasons why the central bank may decide to increase the repo rate. One reason is to curb inflationary pressures in the economy. If the economy is growing too quickly and there is too much money in circulation, prices may start to rise rapidly. In this situation, the central bank may increase the repo rate to make it more expensive for banks to borrow money and reduce the money supply, which can help to control inflation.

Another reason why the repo rate may be increased is to protect the value of the currency. If the value of the currency is falling, it can make imported goods more expensive and lead to inflation. In this situation, the central bank may increase the repo rate to make it more expensive for banks to borrow money and reduce the money supply, which can help to support the value of the currency.

Overall, the decision to increase or decrease the repo rate is a complex one that is based on a variety of economic factors. The central bank must carefully consider the state of the economy and the potential impact of its actions on inflation, currency values, and economic growth.

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