Repo rate, short for repurchase rate, is the interest rate at which a central bank, such as the Reserve Bank of India (RBI), lends money to commercial banks. Banks obtain loans from the central bank by selling qualifying securities, and the central bank and the commercial bank would reach an agreement to repurchase the securities at a set price. The repo rate is utilized by the central bank to manage inflation. If the central bank increases the repo rate, it makes credit costlier, which can help curb inflation by discouraging banks from borrowing and reducing the money supply in the economy. Conversely, if the central bank decreases the repo rate, it encourages banks to borrow and increases the money supply available to the general economy. The difference between the repo rate and the reverse repo rate is that the former is the rate at which the central bank lends money to commercial banks, while the latter is the rate at which commercial banks park excess funds with the central bank.