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Questions
What is the repo rate?
What is meant by repo rate?
Long Answer
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Solution
The repo rate (or repurchase rate) is the interest rate at which the RBI lends money to commercial banks for a short period, using government bonds as security. In this process, the RBI buys government bonds from banks with an agreement to sell them back later at a specific price.
The repo rate represents the rate at which the RBI injects liquidity into the banking system. If the RBI wants to make borrowing costlier for banks, it raises the repo rate. Conversely, if the RBI wishes to make borrowing cheaper, it lowers the repo rate.
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