Question

Explain the following terms :-
A) Repo rate
B) Reverse repo rate

Answer 1

that's simple

repo rate is nothing but when the reserve Bank provide the money to the commercial bank in case of scarcity of funds

reverse repo rate is nothing but when reserve Bank has scarcity of funds it borrows money from commercial banks of India

hope it's helpful

Answer 2

Repo Rate :-

• Repo rate can be defined as an amount of interest that is charged by the Reserve Bank of India while lending funds to the commercial banks. The word ‘Repo’ technically stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’. Both the parties are required to sign an agreement of repurchasing which will state the repurchasing of the securities on a specific date at a predetermined price. The repo rate in India is controlled by the Reserve Bank of India.

• On 4 th October 2019, the Reserve Bank of India (RBI) revised its repo rate to 5.15% from the previous repo rate of 5.40% with a decrease of 25 basis points whereas, the present reverse repo rate is 4.90%.

• Bankers Acceptance features maturity periods ranging between 30 days up to 180 days.

Reverse Repo rate :-

• Reverse repo rate is the rate of interest that is provided by the Reserve bank of India while borrowing money from the commercial banks. In other words, we can say that the reverse repo is the rate charged by the commercial banks in India to park their excess money with RBI for a short-term period.

• The current reverse repo rate in India as of October 2019 is 4.90%. Reverse repo rate is an important instrument of the monetary policy which control the money supply in the country.