Topic Details (Notes format)

Repo, Reverse Repo & Bank Rate

Subject: Economy

Description

These terms refer to various instruments and rates used in monetary policy. Repo is the rate at which banks borrow funds by selling securities with an agreement to repurchase, reverse repo is the opposite transaction, and the bank rate is the rate at which a central bank lends to commercial banks. Example: The RBI uses these tools to control liquidity.

Summary

Repo and reverse repo facilitate short-term lending; the bank rate influences overall interest rates.