Q. Increase in bank rate/ repo rate acts as a warning -signal to the commercial banks to maintain healthy reserves of their vault cash (caution money to sustain their liabilities related to demand deposits. to create credit is reduced. Accordingly, supply of money is reduced.  On the other hand, when bank  rate/repo rate to create  is reduced, the banks are induced to lower their vault cash. This increases their capacity to create credit. Accordingly, supply of money is increased.