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WHAT DO U MEAN BY REPO RATE???
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Answer Posted / sannu
Discount rate at which a central bank repurchases government
securities from the commercial banks, depending on the level
of money supply it decides to maintain in the country's
monetary system. To temporarily expand the money supply, the
central bank decreases repo rates (so that banks can swap
their holdings of government securities for cash), to
contract the money supply it increases the repo rates.
Alternatively, the central bank decides on a desired level
of money supply and lets the market determine the
appropriate repo rate.
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