when the federal reserve uses a reverse repo the central bank initially sells securities and agrees to buy them back later in these cases the fed borrows money from the market which it may do when there is too much liquidity in the system regular repurchase agreements repos in which the fed plays the role of the lender by buying securities and then selling them back are a more common central bank measure to inject additional reserve balances into the banking system the fed is not the only central bank to use this liquidity maintaining method the reserve bank of india also uses repos and reverse repos as they work to stabilize the economy through the liquidity adjustment facility 
the bottom linea reverse repurchase agreement rrp or reverse repo refers to the seller side of a repurchase agreement repo the party executing the reverse repo sells assets to the other party while agreeing to buy them back later at a slightly higher price from a practical perspective a reverse repo agreement is akin to taking out a short term loan with the underlying assets serving as collateral 