Repo rate
Repo rate is the rate at which the central bank of a country (Reserve
Bank of India in case of India) lends money to commercial banks in the
event of any shortfall of funds. Repo rate is used by monetary
authorities to control inflation.
Description:
In the event of inflation, central banks increase repo rate as this
acts as a disincentive for banks to borrow from the central bank. This
ultimately reduces the money supply in the economy and thus helps in
arresting inflation.
The central bank takes the contrary
position in the event of a fall in inflationary pressures. Repo and
reverse repo rates form a part of the liquidity adjustment facility
π Repo rate is the rate at which the Central bank of India grants loan to the commercial banks for a short period against government securities.
π The Repo Rate is always higher than the Reverse Repo Rate.
π The Repo rate is a monetary tool used by the central bank for controlling the Inflation
π Repo Rate is charged on Repurchase Agreement
πRepo rate is overnight / short term rate . While RBI sells money to banking system , this rate will be charged to commercial banks . Bank get money on collaterals of repo permitted bonds . These repo bonds will be given back to banks on maturity while RBI get backs it's money as per Repo terms. Repo rate is policy rate of RBI.
πRepo rate is overnight / short term rate . While RBI sells money to banking system , this rate will be charged to commercial banks . Bank get money on collaterals of repo permitted bonds . These repo bonds will be given back to banks on maturity while RBI get backs it's money as per Repo terms. Repo rate is policy rate of RBI.
πThe Bank Rate is the rate at which the Central Bank discounts the bills of commercial banks.
πIn bank rate there is no need for collateral security.
Reverse Repo rate
Repo rate
is the rate at which our banks borrow rupees from RBI. This facility is
for short term measure and to fill gaps between demand and supply of
money in a bank. when a bank is short of funds they they borrow from
bank at repo rate and if bank has a surplus fund then the deposit the
funds with RBI and earn at Reverse repo rate
π Reverse repo rate is the rate at which the commercial banks grant loan to the Central Bank of India.
π Central bank uses reverse Repo Rate for controlling the supply of money in the economy.
π Reverse Repo Rate is charged on Reverse Repurchase Agreement.
π With the increase in the rate, the flow of money in the economy decreases as the banks will now invest its money with RBI due to safety and lucrative interest rates.
Bank rate
Bank rate
is long term rate . This will be greater than repo rate ( by 1% as per
prevailing rule ) and equal to marginal standing rate . Bank rates are
applied in following scenarios .
Bank rate
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