Repo & Reverse repo rate

What is a Repo Rate?
Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate isthe rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.

In a reverse repo Reserve Bankborrows money from banks by lending securities. The interest paid by Reserve Bank in this case is called reverse repo rate.