---
title: "Reverse Repo Rate: RBI's Borrowing Tool | Model Diplomat"
description: "The reverse repo rate is the interest rate at which central banks borrow from commercial banks, crucial for managing liquidity in the economy."
url: "https://modeldiplomat.com/learn/glossary/reverse-repo-rate"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The reverse repo rate is the interest rate at which a central bank borrows money from commercial banks by selling them government securities under a repurchase agreement.
- Why is the reverse repo rate always lower than the repo rate?
- Has the Standing Deposit Facility made the reverse repo rate obsolete?
- How does the reverse repo rate differ from the Cash Reserve Ratio?
- Who decides the reverse repo rate in India?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In May 2020, the Reserve Bank of India cut the reverse repo rate to 3.35 percent—below the 4.00 percent repo rate—to discourage banks from parking surplus funds and push credit toward a pandemic-hit economy.

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