Reverse Repo Rate (RRR) is the rate of interest provided by RBI to other banks for the funds deposited in the RBI. In simple terms, reverse repo rate is that rate at which RBI gets loan.. The current RRR is 7% which has rose from 6.5%. When RBI gets loan from banks at high rate of interest, more and more banks will supply to central bank because it is safe and earning is more. Effect of this will on financial market. Supply of money in financial market will decrease. In economics, it is simple rule, if supply is limited and demand increases, price of product will increase. Bank has lots of demand but due to limitation of supply, bank increases interest rate. That is the reason. But its positive effect will on credit. Due to decrease in the supply of credit in the market, inflation rate will decrease.
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