Question

Difference between bank rate and repo rate 2

Answer 1

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Loan vs. Securities – As already discussed, bank rate usually deals with loans, whereas, repo or repurchase rate deals with the securities. The bank rate is charged to commercial banks against the loan issued to them by central banks, whereas, the repo rate is charged for repurchasing the securities.✔✔

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Answer 2

Explanation:

Bank Rate is the rate of interest which a central bank charges on the loans and advances to a commercial bank, without selling or buying any security. Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.

Repo Rate refers to the rate at which the Central Bank lends money to the commercial banks in case of shortage of funds. It is basically used by Central Bank to keep inflation under control. When a commercial bank sells the security to Central Bank to raise money then banks promises to buy back the same security from Central Bank at a predetermined date with an interest at the rate of REPO. It is actually a repurchase agreement.