The move was an attempt to discourage commercial banks from salting away the money they access from the central bank’s borrowing windows with the RBI itself. The central bank slashed the reverse repo rate to 3.75 per cent from 4 per cent while keeping the policy repo rate unchanged at 4.4 per cent. The repo is the rate at which the RBI lends short-term funds to banks; the reverse repo is the interest that banks earn on surplus funds that they park with the central bank. This is an auction where banks can raise funds at the policy repo rate of 4.40 per cent from the RBI. They will have to deploy the money in the segments specified by the RBI.

Source: The Telegraph April 17, 2020 22:30 UTC