What is repo rate/ revers repo rate?

REPO RATE :
Repo rate is the rate at which the banks borrow money from RBI.


Banks need money to run the bank. If a bank meets a shortage of money it demands money from the RBI. RBI issues the money at a certain rate of interests to banks which is called repo rate. 


If inflation of the country hikes,

• RBI increases the repo rate
• So Banks increases its interest rates for common man and other corporate 
• So money lending of common man and corporate from the bank will decrease
• So the money circulation will come down 
• and the inflation will be controlled. 

At present repo rate in india is 8%

REVERSE REPO RATE:

It is the rate at which the RBI borrows money from the banks.

If reverse repo rate increases,

• Banks will keep its money in RBI for its higher interest rates.
• So money circulation will come down.
• Inflation will be controlled.

At present reverse rate in india is 7%

How it affects the  stock market?

 If the repo/reverse repo rates increase the money circulation will be controlled. so the small/ medium/ large capital corporate will face a money  shortage to run their industries. So automatically stock market will fall.