Under a reverse repurchase agreement, the RBI is effectively

1. In a reverse repo the RBI sells a security with an agreed repurchase date and price. 2. Banks part with funds to buy it. 3. So the operation **withdraws money** from the system. 4. A permanent injection would be an outright purchase, not a reverse repo, which makes that option the trap. _Source: syllabus Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.4 POLICY TOOLS TO CONTROL MONEY SUPPLY_