Reverse repo operation is when RBI borrows money from banks by lending securities.
The origin of repo rates, one of the components of liquidity adjustment facility, can be traced to as early as 1917 in U.S. financial market when wartime taxes made other sources of lending unattractive.
The introduction of the liquidity adjustment facility in India was on the basis of the recommendations of Narasimham Committee on Banking Sector Reforms (1998).
As per the policy measures announced in 2000, the Liquidity Adjustment Facility was introduced with the first stage starting from June 2000 onwards.
Hence in October 2004, when the revised scheme of LAF was announced, the decision to follow the international usage of terms was adopted.
The period between April 2001 to March 2004 and June 2008 to early November 2008 saw a broader corridor ranging from 150–250 and 200–300 basis points respectively.