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Macronomics: What is Reverse Repo and How Are Banks Dealing With Too Much Money?


The banking system is going through a totally crazy time. People have deposited over Rs. 500,000 cr. in two weeks since demonetization was announced. Since there are withdrawal limits, they have not withdrawn quite as much (only Rs. 100,000 cr.). So, there's some Rs. 400,000 cr. or more that has been deposited in bank accounts since November 10. That money has to go somewhere. Right now, it's going straight to the RBI. As "reverse repo". Let's explain this a little further now. What is Repo and Reverse Repo? RBI: the Liquidity Source . . .

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