Conversely, the Reverse Repo Rate is the interest rate at which the central bank borrows funds from commercial banks. It is essentially the opposite of the repo rate, representing the rate at which commercial banks deposit excess funds with the central bank in exchange for earning interest. Commercial banks, having surplus liquidity, opt to invest their excess funds in low-risk instruments like government securities through reverse repo transactions with the central bank. The reverse repo rate serves as a crucial tool for the central bank to manage liquidity in the banking system. By adjusting the reverse repo rate, the central bank can influence the level of excess reserves held by commercial banks. Increasing the reverse repo rate incentivizes banks to park more funds with the central bank, thereby reducing the liquidity available for lending in the economy. Conversely, lowering the reverse repo rate encourages banks to deploy excess funds in lending and investment activities, thereby boosting economic activity.